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UNIVERSITY  OF  CALIFORNIA 
AT   LOS  ANGELES 


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fSCIKNTlFIC,     HISTORIC,     AND     PRACTICAL     TREAThSE     ON 

THE    SUBJECT     OF     FINANCE,     WITH     OVER     SIXTY 

STATISTICAL     TABLES     ILLUSTRATIVE     OF 

THE     HISTORY    AND    POINTING    THE 

ARGUMENTS     EMBRACED 

IN     THE     WORK. 


ALSO,   A 


REVIEW  OF  AUTHORS, 


BY  R,  W.  JONES. 


ST.    LOUIS  : 

DAVIS    &    FREEGARD. 

1878. 


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143 


In  tifth  and  sixth  lines  from  top  of  page, 
it  should  be  -  Si  to  4"  (not  §4),  and 
"  ^/iT  to  4"  (not  S4). 

Total  footing  of  first    eolunin  of  tigures  in 

the  table  should  hv  -  $1  .77l\:)()O,000." 

Total  iuEurope  should  be  "$2,4()(),000,000" 
in  the  footing. 

In  the  l.'ltli  line  from  top  of  page  the  tig- 
ures should  1)0   '•  $2,()!)0.00l),(K)()."" 

Ninth  and  tenth  lines  from  toj)  of  page 
ought  to  read  ;  ••  I'he  imi)t)rtant  point 
with  them  is  hiore  <i  >:[i'o  repository," 
etc. 


n 


AITTHORS  PREFACE. 


~  When  the  author  c-ommeiiced  the  iiiViestigation  of  the 
subject  of  Money  he  did  it  simply  for  information. 
During-  the  progre-ss  of  his  researches,  extensive  notes 
were  made,  and  when  he  liad  u'ot  throuirh  he  found 
ample  materials  had   been   collected   for  a  book  ;  and 

'=?  believino-  the  statistii-al  facts  and  monetary  history  col- 
lected  would  be  useful  and  interesting  to  the  public,  he 
arrano-ed  them  in  systematic  form  and  submits  them, 
together  with  the  results  of  his  reflections,  to  the  can- 

]  did  reader.      Finding   that   discussions   of  the   subject 

4  had  often  been  contracted  in  view,  and  superlicial  in 
<?sT  eharacter,  the  author,  to  avoid  those  defects,  constantly 
endeavored  to  gather  within  the  range  of  his  inquiries 
all  the  forces  which  affect  the  material  interests  of  a 
.people;  find  out  the  prime  causes  of  national  pros- 
perity and  adversit}^ ;  discover  the  true  nature,  laws, 
and  functions  of  money,  and  assii>"n  to  the  latter  its 
frue  powers,  in  an  economic  point  of  vieAv,  as  a  force 
('ontril)uting  to  the  development  and  proper  applicatioji 
of  man's  mental  and  physical  powers.  Such  a  course 
has  resulted  in  ])ringin<r  him  in  contlict  with  mauy  writers 
who  have  preceded  him. 

The  nature  of  the  work  made  it   necessary  for  him 


-'iC'^s^r\<nrk 


IV  AUTHOR  S  PREFACE. 

to  review  uiul ^criticise  the  theories  of  those  who  differ 
with  him — a  duty  he  fain  would  have  avoided,  but  one 
which  he  endeavored  to  discharire  in  a  candid  and 
courteous  manner. 

At  the  conclusion  is  a  monetary  system  deduced  from 
fundamental  truths  Avhich  have  been  estaldislied  and 
are  sustained  by  monetary  commercial,  and  industrial 
liistorv  through  a  lonir  course  of  vears. 

The  work  was  prepared  for  the  perusal  of  all  classes, 
and  is,  therefore,  as  plain  and  simple  in  lanirua<re  and 
style  as  the  autlior  could  make  it  in  the  time  he  was 
eno-aged  on  it.  Whatever  repetition  nuiy  be  <liscovered. 
was  pnr))osely  inserted  to  keep  constantly  befoi*e  tiic 
mind  of  the  casual  I'eader  certiiiii  important  truths. 

Notwithstandino-  the  diiferences  in  tlieor\'  which  ma\' 
(^Kist  between  the  author  and  reader,  yet  the  historic 
:ind  statistical  ]K)rtions  of  the  work  cannot  fail  to  in- 
terest the  hitter,  because  ihcy  :irc  anthciitic — Meiiii:- 
eollected  from  the  most  reliabh'  sources. 

Tf  the  work  should  result  in  throwing  any  light  upon 
the  sul)ject  treated,  which  is  now  being  discussed  from 
Maine  to  California,  and  from  the  Ltd^es  to  the  Gulf 
of  Mexico,  the  author  will  be  satisfied,  and  considtn- 
himself  compensated  for  his  laboi's. 

MoNTiiOMKKY  CiTV,  MO., 

March  l^t,  1878. 


TABLE   OF   CONTENTS. 


Pkkkatoky — Chaptkr  First. — Review  of  Authors 5  i 

Aristotle,  ti.    Fhigland  in  1696:  John   Locke;  Re-coinage,  7.    Lord  j 

iMacaulcy,  S.     John  I-a\v    his  Tmths  and   Errcrs,  9.     David  Hume,  i 

10.     Adam  Smith,  11.     Dugald  Stewart ;  Parliamentaiy  Committee.  >• 

12.     Theii-  Errors,  13.     Lord  King,  1.5.    Mr.   Huskisson,   16.     David  \ 

Kicardo.  !S.    Lord  T^iverpool ;  Scotch  Banks,  48.    Thomas  Tooke  ;  ' 

Mr.  Wilson,  19.  J.  H.  McCulIoch,  20.  John  Stuart  Mill.  21.  H.  D. 
Macleod,22.  Henry  Fawcett :  Continental  Moner,  2;?.  W.Stanley 
.levous,  24.  Francis  Way  lain! ;  Francis  Bowen,  25.  His  Error.s,  26. 
Wm.  G  Sumner;  A.  K.  I'eery;  Cary  Baird;  B.  A.  Hill,  27.  Henry 
V.  Poor,  28. 

riiKKATouY— Ch.apteu  SECOND  — Criticisms  on  Current  Theories. .33  I 

tritia  Greenhackers,  3:i.    The  U.  S.  as  a  Money  Broker,  .•;7-    Inter-  I 

convertible  Bonds,  ;5S.    Interest.  39.    Xothing  hut  Legal  Tenders  40.  ! 

'""Tluriliildi'nCalf,  41.    National  Banks.  44.    Patches,  47     Ci>mnuiiie,4S.  J 

Cuvi'TKRl. — Money  tdtyrfuwcrs  and  Fimctioixs^: 51  '. 

Measure  ;Xi)miiial :  Ideal,  .tI.    Mental  Process  ;  Tlie  .\frican  .\facute:  • 

>\vaiis  ;  Kstimaling  and  Expressing  Values,  .'vj.     Plenty  of  Measures  ' 

S^ecossarv;  .V  Medium  of  Exchanges,  53.    Plenty,  easy  to  get ;  Scarce, 
^hard  to  get ;  Important  Power;  Without   Money,  Man  Heduced  to 
What,  .54      Illustration;  Business  Blocked.  .55.    Industries  Ruined;  j 

Money  Combines  and  .Vpplies  Man's  Powers.  .56.     .Amount  Xeeded  I 

Depends  on  Civili/.ation  ;  Limit  to  Right  Cse  of  Money  ;  Every  Brain  i 

and  Hand  Pi-otltably  Emi)loyed;  Pror)lcm.57.     Rule  for  Money  and 
its  Increase:    Exception,  .59     Over-issue;   Money  Imparts  Money  ^ 

Values:  .V  Thing;  Relative  Value;  ItsPower  Affected  by  Conditions,  ^ 

60.  Illustrated  :  Xapolconic  Wars,  61.  Effects  of  Plenty  ;  Effects  of 
InsiitHciency  ;  Over-iiroductiou,  62.  Detilining  Volume,  63.  Rome; 
.Vugustus;  Justinian;    The    Dark    Ages;  Isriel;    Persia;    Greece;  \ 

Europe;   .Vmerica.  6t.    Circulation  its  Proper  Use:   What  Consti-  • 

tutes  a  Thing  Money;  Gold  and  Silver.  65.    Need  not  have  Com-  i 

modity  Value  :  Indian  Wampum,  66.     Bank  Paper:  Money  is  What,  ' 

•■7.  May  consist  of  Anything:  Intrinsic  Value;  .Vrticles  of  Confed- 
er.'Uioi\,  68.  No  Power  to  make  Money;  Constitutional  Powers  of 
Congress,  69.     Different   Oynnions;   Supreme    Court   Decision,  70. 


VI  TABLE  OF  CONTENTS. 

Act  of  179-2 ; Copper ; Strict  Construction;  'Coin,"  "Money,"  and"To 
Coin;"  Their  Meaning.  71.  To  Make,  Fabricate,  Invent,  Stamp 
any  Material ;  Objection  to  Legal  Tendei-s  Answered,  73. 

('HAPTER  II. — Standard  of  Values 74 

Two  Theories,  74.  Cold  and  .Silver  not  Uniform;  Evils  llesulting-, 
75.  Illustrated  by  Imports,  76.  Value;  Commercial  llelation,  77. 
Their  Values  Change;  Fluctuations  since  1.513,  78.  Silver  Declined 
Only,  How;  Fall  of  Lands,  79.  Value  of  Metals  not  Absolute,  80. 
Controlled  by  Demand  and  Supply ;  Demand  Increased,  Valua  In.- 
creases,  81.  H.  V.  Poor,  82..  Universal  Law  of  Values;  BulUonists 
Essay  to  Avoid  it,  85.  Cold  Hunting  in  California;  Its  Cost,  84. 
Bullion  Theorj-;  Al)surdity  of  it;  Illustrated,  86.  Addition  to  Stock 
of  Gold  from  18.50  to  18.55 ;  Increased  Use  in  Arts ;  Decline  of  Supply  ; 
Cause  of  its  Rise;  Never  can  be  an  Unvarying  Standard,  88.  Paper 
Money  not  Symbolic;  Amount  in  1860;  Values  of  1860;  Money  an 
Absolute  Power;  >[ine.y  and  Property  Oijposing  Forces,  81).  Sym- 
bolic Currency ;  Bi-ror  Illustrated;  Any  (juauiity  of  .Money  wid  be 
Used,  9U.  Checks,  Drafts,  Bills,  etc.^  Not  Symbolic,  91.  Nominal 
and  Exchange  Value  of  .Money  Different;  Quantity  of  Money  Bears 
a  Relation  to  Value  of  Propertj'.  92.  How  Value  Attaches  to  a 
Thing;  How  Paper  Becomes  Eijual  to  Gold  in  Value;  Bits  of  Paper 
in  the  U.  S.  and  Gold  in  England,  93.  Money  .Vcting  on  Propertj' 
produces  Prices.  96.  E({Uilibriumof  Values  and  a  Standard  Impossi- 
ble, 97.  Inflation  of  Redeemable  Paperand  Legal  Tenders;  Effects, 
97.  Cause  of  Panics  and  Crises;  Legal  Tenders  Prevent  them,  99. 
Illustrated ;  Rules  of  Differences  of  Values  of  Money,  100.  Banks 
of  Issue  Compelled  to  Violate  the  Primai'v  Laws  of  the  Supply  of 
Money;  Evils  of  the  System,  103.    Benefit  of  Legal  Tenders,  104. 

(.'iLxPTER  III. — Causes  of  the  Rise  and  Fall   of  Prices  <>f  Prop- 

er-l^y   and  Gold  Premiuni     1 07 

Kinds  of  Money  ;  Table  of  Pai)er  from  1S54  to  1877,  i07.  How  the  Ex- 
pansion and  Contraction  was  Etfectfed;  Seeming  Paradox,  lOS.  Im- 
mediate and  Remote  Effects  of  Large  and  Small  Volume  of 
Money  on  Prices  and  Production,  108.  Table  of  V^alueof  Gold  from 
1862  to  1875,ill0.  Tables  of  Pri(jes,  HI.  Rise  and  Fall  of  Prices  not 
J_^,-  in  Ratio  to  Amount  of  MonefflKJ.  Critical  Analysis  of  Cause-^  Each  i^ 
year,  114.  Tables  of  Kxi)orts  and  Imi)orts  of  Merchandise  and  tiold 
and  Silver,  115.  :>!.  VicDn-  Bonnet  on  Fi-encli  Finance  118.  Mr. 
Huskison  in  BritisliParlianienC  119.  Prices  Affected  by  Paper  a.s 
well  as  Coin,  IJO.  Increase  of  Paper  addsto  the  World's  Stock  of 
Money;  Raises  Values  and  Reduces  Gold  Value;  ExampreS— Eng- 
land, France,  Germany,  .\ustria,  U.  S.,  121.  Rule  of  Coin  Premium  • 
and  Prices,  123.  Debtor  Nation  Ought  to  Have  Paper;  Resumption  ., 
Delusion;  .Mr.  Ricardo,  124.  (ireat  Decline  must  result,  125.  One 
fouth  of  the  Commercial  V.dues  will  be  Destroyed  by  Resumption, 
136. 

Chapter  IV. — Par;  its  Laws 127 

.What  Produces  it,  127.  Evil  when  For<^ed;  Resumption  Intensi- 
ties Demand  for  Coin,  138.  Result  of  Forcing  a  Par  of  Values ;  What 
Pii  and  Premium  indicate,  129.    Eft"ects  of  Depreciated  Currency 


TAKLE  OF  CONTENTS.  VII 

(HI  Coininerce  130.  Par  not  IIil' Goal ;  Money  ti>  do  the  Vast  Busi- 
ness is  the  Thing;  Amount  of  Business  Done,  131.  I'lobaMe  Effects 
of  Renionetizing  Silver,  132.  Will  not  Save  tlie  Country  from  Evils 
of  Forced  Par  by  Kesuniption,  l;'.;i.  . 

Cn.vPTEK  v.— Gold,  Silver  and  Paper  Money  in  tlio  World 4<t'Sn 

Civiliz.ttion;  Increase  of  Commerce  ;  Gold  Products  Since  1492.  135. 
Table  of  Products,  Consumption,  etc.,  from  It^Kt  tolSTl;  Products 
of  Silver  fi-om  1492  to  ISTii:  Amount  Consumed  in  Arts.  136.  Faw- 
cell's  Table  of  Gold  and  Silver  in  Europe ;  Criticism  13S.  Table  of 
Gold  and  Silver  in  the  World.  140.  Method  of  Estimation,  141. 
Table  of  per  capita  Supply  of  Money  in  the  Four  Quarters  of  the 
Globe,  142.  Table  of  Paper  .Money  in  the  World  and  Where  Dis- 
tributed ;  Tables  of  Commerce  of  Great  Britain,  France  and  U.  S., 
143.  X.  Y.  Clearings  from  1SJ4  to  liSTT;  London  Clearings  from  IStiS 
to  1874;  Increase;  Present  Decline;  Rome;  Venice,  145.  Table  of 
Gold  and  Silver  Products  from  i8.)3  to  1876;  That  Shipped  to  Asia 
never  returns,  147  Decline  in  Supply;  Decline  in  stock:  Paper 
Declined  ;  Depression  ;  Government.- n)  ust  Increase  the  Paper  or 
sutler  Decline,  14?'. 

C'u.vPiEK  VI  — Bonds  of  the  Civilized  World 14'.i 

Coalitions  and  Accidents  which  Caused  the  Indebtedness.  149. 
Table  of  National  Debts,  151.  Increase  since  1S75;  Municipal,  Stale 
and  Railroad  Debts,  152.  Five  Times  the  World's  .Money,  153.  Be- 
come Oppressive,  154.     Bitter  Contest,  155. 

CiiAPTKK  VII.— The  Mouej'  Power i^. 150 

Owns  Bonded  Indebtedness  of  the  World,  loti.  Its  Character ;  Its 
Policy;  Its  Vast  Power  and  Influence,  157.  Enemy  of  Iudu>tries; 
Inimical  to  Civilization,  l.M).     Conllict,  16U. 

Chapter  VIIL— Gold  and  Silver  Product  in  tiie  I'liited  States. . .  ICI 
Secretary  of  the  Treasury,  l(il,  Mint  Director's  Estimate;  How  he 
gets  it;  Errors;  Amount  used  in  Arts,  162.  Deposits  at  the  Mints, 
163.  Raymond's  Estimate  of  Gol(l :  Monetary  Commission's  Esti- 
mate of  Silver,  164.  Fawcetl's  Tables;  Finance  Report,  165,  Coin 
in  Baziks;  Coin  Ceriiticates,  166.  Table  of  E.\ports  and  Imports  of 
Merchandise,  Gold  and  Silver,  167.  Debt  Owed  Abroad  and  Inter- 
est,16S.  TableofGold  and  Silver;  Decline  in  1877;  Amount  Brought 
in  by  Immigration,  16;i.  Foreign  Balances  not  to  be  Counted  on: 
Table  of  Customs;  Dec'ine:  Immigrants  Decreasing,  171.  Problem 
for  the  Connlry,  172. 

Cii.vPTKK  IX  — Amount  of  Money  Needed 1 7;'> 

,  Money  Needs  now  Compared  with  1859,-  Tiue  Measure  of  Money 

Needs,  173.  Business  over  three  times  that  of  1S59;  Capital  Stock 
of  Banks  then  auil  now;  Increased  Powers  of  Money  to  Circulate, 
174.  Debts  in  1859  and  1877,  175.  Interest;  Increased  E.xpenditures 
of  States  and  Municipalities;  .■fl,500,000,000  Money  Needed,  176. 

Cu.wTEU  X. — Resumption  ;  the  Money  it  will  Give  Us .177 

Provisions  of  the  .\ct ;  National  Banks  Reduce  their  Issues,  177. 
January,  ls79 ;  After  that ;  Calculations  ;  To  Resume  Strategy ;  Sales 
of  Bonds  for  Legal  Tenders,  178.    Bank  Notes  not  Legal  Tender,  179. 


Vlll  TABLE  OF  CONTP^NTS. 

Coin  and  Paper  in  1859, 179.  E^oportion  of  Bank  Issues  to  Redemp- 
tion Money;  \Vhat  tlie  Banks  will  liave  to  do,  ISO.  Tlie  L:iw  mean* 
the  Destruction  of  all  "Greenbacks"  ;  Banks  then  have  only  Coin 
Reserves,  181.  Coin  now  in  Country;  Can't  Increase  much,  182. 
Table  of  Money  we  will  have  ;  Result,  Destruction  of  Business,  183. 
1882  or  1883  the  Bottom  ;  Why  then,  184.  Vital  Question-Contrac- 
tion, 185. 

Chapter  XI. — Contraction  Caused  the  Country's  Indebtedness. .  l»'2 
When  the  Increase  took  place;  Railroads,  186.  Municipal  Debts; 
Table,  188.  State  Debts,  18Vt.  Bank  Debts,  190.  Tables ;  Individu- 
al Debts;  Calculations  of  Men;  Methods  of  Operating,  191.  Mone- 
tary Commission,  192.  Bank  Laws,  193.  Laws  of  Indebtedness, 
195.  English  Debts ;  Table  of  Bank  Notes  and  Discounts ;  During 
Inflation  Debts  Decrease;  During  Contraction  they  Increase,  196. 
Total  Sum  of  Debts ;  Contraction  and  Ambitions  succeeding  the 
War  cnused  them,  198. 

Chapter  XII.— Debtor  Class ;  Effects  of  Contraction  on  Them. . .  200 
Illustration;  Causes,  200.    Kxti-act  from   Doubleday's  History  of 
England,  201. 

Chapter  XII  [.—Creditor  Chiss ;  Effects  of  Contraction  on  Them.  .205 
Reduces  Interest;  Tables;  Interest  and  Earnings  of  Banks,  206. 
Annihilation  of   Debts;  Xo  Reduction  of  Taxes,  207.    It  Injure.^ 
Creditors;  Inflation  Compensates  them  for  their  supposed  Losses, 
208. 

Chapter  XIV. — General  Effects  of  Contraction 20'.) 

Arguments  against  it,  209.  General  Depression  and  Distress,  211. 
Monetary  Commission,  212.  David  Hume's  Essay  on  Money,  213. 
Alex.  Hamilton's  Report;  Wm.  II.  Crawford;  R.  M.  T.  Hunter,  214. 
Encyclopoedia  Britannica;  Ernest  Seyd,  215.  American  Review: 
Leon  Fouchet;  M.  Wolowski.  216.    Other  Arganienis  217. 

Chapter  XV.— Jlonetary  Affairs ;  Rome,  France,  Germany  21  ^ 

Rome  used  Paper  in  War  with  Cartlmgena,  218.  Reduction  of  Money, 
Fall  of  Rome.  219  France— Revolution  of  1789;  Caused  by  Scarcity 
of  Money  and  Oppressive  Taxes  ;  Table  of  Deficiencies,  220.  A  Les- 
son, 221.  Assiguats;  Causes  of  Depreciation  ;  Gold  and  Silver  De- 
monetized ;  At  Par  in  1793;  Operations  in  1848;  Extract  from  Lon- 
don Times,  222.  After  Franco- Prussian  War,  224.  System,  225. 
Germany;  Errors ;  Cause  of  their  Present  Depression.  226. 

Chapter  XVI. — En,<>;lish  Finance,  Crises,  Strikes,  and  Riots 

from  17'.)3  to  1829..^ 22f* 

Crisis  of  1793;  Remedy,  226.  Crisis  and  Mutiny  of  1797;  Causes  and 
Remedy,  229.  Treaty  of  Amiens  ;  English  Debt,  231.  Table  of  Cur- 
rency, Bank  Discounts  and  Commerce;  War  Again;  Prosiierity  to 
1S09;  Crisis  and  Riots  of  1810-11;  Causes  and  Remedy,  2.52.  Crisis 
and  Riots  of  1816;  (Causes  and  Remedy,  234.  Depression,  Crisis. 
Riots,  Strikes,  and  Incendiarism  of  1819  to  1823,  240.  Extract  from 
Doublcday  g  History,  253.  Cause,  245.  Remedy,  247.  Terrible 
Crisis  of  1825;  What  the  Annual  Register,  Quarterly  Review  and 
Mr.  Alifon  8:iid,  247.    The  Cause,  249.    The  Remedy,  250.    Crisis  of 


TABLE  OF  CONTENTS.  ^ 

18J0,  •r)l:   Kiot.x,  strikes,  Desti-uction  of  Property ;  The  Caude.  262. 
The  Remedy,  iX). 

CuaptkrXVII  — Kniilisli  Finance  History  from  1829  to  1833.... 2r>4 
King's  speech;  Karl  Stanhope,  254.  Domestic  Violence  of  1S29, 
255.  OTonnel) ;  Catholics  and  Protestants,  256.  Alison  ;  Meetings ; 
Posters;  Object,  2.57.  ISU ;  Parliament  Prorogued ;  Brick-bat  and 
BhulKeon;  Sir  Walter  Scott,  258.  Political  Unions  150.000;  Mobs, 
2.59.  Destruction  of  Property,  260.  18:52 ;  Ueforni  Bill ;  Threats  ;  Re- 
bellion ;  "Mobs  40,000  strong.  260.  18:53;  Distress  General,  Extreme, 
(rnnatiiral ;  Th>;  Cause,  261.  Tables  of  Money  and  Bank  Discounts, 
1815  to  18:54;  Tables  of  Exports  and  Imports,  1815  to  18:5'.;  Sii-  A.  Ali- 
.-.ou,  2<>:5  Mr.  Attwood  in  Parliament,  265.  Effect  on  Prices,  2o6,  < 
The  Remedy,  260.  Tables  of  Kmigration,  Mortality.  Pauperism, 
<'rime,  and  llevenue;  Banking  System  of  England.  270. 

Cii.MTKK  XVIir.— Moiietiiiy  History  of  the  United  States;  Cri- 
ses to  the  Close  of  the  Rebellion    -7o 

Condition  after  the  War  of  1812,  274.  Bank  Paper; Crisis  of  1818-20, 
275.  Great  I^os.■^cs  Pennsylvania  .Senate,  276.  Causes  of  the  Crisis, 
277.  Table  of  Circulation  and  Specie  from  1811  to  1851 ;  Crisis  of 
18:57,  278.  U.  S.  Bank  Charter;  Democracy;  .Jackson;  The  Veto,  279. 
Removal  of  Deposits;  .state  Banks;  Expedient  to  Avert  the  Crisis, 
280.  Revenue  Destroyed  ;  Fall  of  Cotton,  281.  Repudiation  of  State 
Debts,  282.  The  Cause;  Table  of  Exports  and  Imports,  28  5.  Im- 
mense Balance;  Contraction,  284.  Speculation,  285.  Amount  of 
Money,  286.  Panic  in  Belgium,  France  and  England,  287.  Crisis  of 
1857;  Cause,  288.     Varying  Values  of  Coin,  289. 

('iiM'iKK  XIX  —.Monetary  History  of  tlie  United  States 2!tl 

Present  Crisis:  Blindness  of  Government ;  Disi-egard  of  Laws  of 
Prosperity,  291.  Process  of  Contraction;  Credit;  CUilminated  in 
187:5;  Resumption  Act  Ctmtinues  the  Evil,  292.  Forces  Oi.erating 
from  186«i;  Fall  of  Prices;  Reduction  of  Money:  Balances  of  Trade, 
293.  Resulted  in  the  Great  Strike; Business  Still  Declining;  Table 
of  Xevv  York  Clearings;  Opinions  of  Others,  294.  Hon.  \Vm.  D. 
Kelly's  Speech ;  Senator  Beck's  speech;  295.  Peter  Cooper's  [>et- 
ter,  296.  'Sydna  Meyers,  Banker,  297.  X.  Y.  Sun  on  the  Strikes,  298. 
X.  Y.  Telegram  on  Workingmen,  299.  True  Citizen;  Wilkes  in  the 
Herald  ;  Geo.  Adger  in  the  Contemporary  Review,  :500.  X.  Y. Times: 
Henry  C.  Cary,:*,01.  X.  V.  Free  Press;  N.  Y.  Herald;  Mo.  Republi 
can,  :W-1.  Ex-Gov.  Uardin  ;  X.  V.  Times.  30:5.  Secretary  Sherman 
in  1869,  :!04.  Ohio  H.  I.'.:  Railway  Age;  X.  Y.  Financial  Chronicle, 
;;05.  Hon.  B,  A.  Hill;  Hon.  .).  .\.  Dacus;  X.  Y.  Sun,  307  Mr.  Hay- 
maud,  :508.  Hon.  15.  A.  Hill;  Hon.  J.  A.  lJacus,:509.  Hon. T.  T.  Crit- 
tenden. 311.  St.  Louis  Times,  312.  Hon.  VV.  D.  Kelly,  313.  Bankers' 
Magazine.  314.  Table  of  Paui)erism,  315.  Capital  on  a  Strike  ;  The 
C'ause;  Hon.  D.  A.  Wells,  316.  Monetary  Commission.  317.  Arch- 
bishop Purcell,  :(21.  Hon  S.  F.  Gary;  Hon.  A.  H.  Buckner,  322.  Mr. 
Hamilton,  :523.  Table  of  Bankruptcies  from  1857to  1877  :  Mercantile 
Journal,  :524.  Mo.  Republican,  :525.  Hon.  Henr>-  Gary  Baird  on 
Decline  of  Values  and  Bankruptcies;  Taxes,  etc.,;526.  Xo.  of  Deaths 
in   the   U.  S. ;  Total  Value   of   Property   in  1860,  1870,  and  1877,  :5:;o. 


X  ^ABLE  OF  CONTENTS. 

Per  Capita  Paper  in  ISiJO  and  1877.  3:53.  Railroad  Failures ;  Tables, 
:i33.  Bank  Earnings  and  Losses;  Tables:  Prisoners  in  the  United 
States  in  1860  and  1870;  Increase;  Paupers  Ooubled,  334.  Table  of 
Heavy  Embezzlemen's  ;  Tables  of  Government  Revenue  -.  Inimigi-a- 
tion  and  Emigration,  33.'5.  Table  of  Condition  of  shipping  in  1857 
and  1877,  336  All  Business  in  Decay,  336  Depression;  Decline; 
Disaster,  337.    The  Cause,  .339. 

Chapter  XX.— The  Remedy  :  a  Perfect  Monetary  System 341 

First  Thing  to  be  done;  Identity  of  Interest  of  all  Classes,  ,341. 
Money  Power,  342.  Conflict,  343.  The  Duty  of  Government,  344. 
Commercial  History  settles  What,  345.  To  Secure  Relief,  Renione- 
rize  Silver :  Benefits,  .345.  Repeal  the  Resumption  Acts;  Effects 
and  Benefits,  :346.  All  want  Paper  Money,  :}48.  Xational  Bank 
NTotes  should  be  Retired,  348.  Increase  the  Currency  and  Oischarge 
the  National  Debt  with  it,  :i48.  Graduated  Issues ;  Buy  Bonds  with 
it,  3.50.  Surplus  Revenue  to  be  used  same  way.  .352.  New  Legal 
Tenders  to  cover  Loss  and  Increase  the  Volume  as  Population  In- 
creases; In  Times  of  Peace  Prepare  for  War,  :5o3.  A  Coin  Fund  to 
be  raised  and  sacredly  kei)t  for  War;  Objections  Answered.  354 
Postal  Deposits;  .3.57.  Subsidiary  Coins;  Constitutional  Amend- 
ment, 358. 

Chapter  XXI. —Beuetirs  of  the  System;  Peace  and  ?:ndiu-iug 

Prosperity 360 

I'lenty  of  Money  without  Pi-oduciiig  Crises,  :360.  Largely  In- 
creases Government  Revenue,  361.  Table  of  Revenue  from  18.i0 
to  1876.  Enhance  the  Value  of  Public  Securities;  Give  us  the 
Best  Paper  in  the  World;  Set  the  Nation  to  Work.  :563.  Pay  off  the 
Government  Debt  in  a  iew  Vears;  Free  us  from  the  Money  Power. 
364. 

Chapter  XXII.— Siigiiotioiis  Subsidiary .^«7 

Money  Does  not  take  the  Place  of  Virtue  and  Intelligence,  but 
Promotes  Both,  367.  Shipping  Laws  Ought  to  be  Amended;  Nava- 
gable  Rivers  Opened;  Trunk  Riiilroads  Aided,  :568.  Canal  Across 
Central  America;  Tendency  of  Land  to  Concentrate  in  hands  of  the 
few  Dangerous,  369.  National  Pride  in  owning  Homes  to  be 
.Vroused;  Mr.  Garfield;  Eflects  of  Resumption  on  Labor";  How  will 
we  get  the  Money,  373. 


PREFATORY— CHAPTEK  FIRST. 


REVIEW  OF  AUTHORS. 

Xo  subject  lias  Ixh'Ii  nioiv  discussed,  duriiii:"  the 
U'th  Ceuturv,  and  less  understood  than  that  of  ^Nlonev. 
Money,  liUe  every  otlier  subject  of  economic  science, 
is  affected  and  its  forces  are  modified  oi'  intensified  b\ 
a  myriad  of  things.  The  peculiar  ci\  ilization  of  ;. 
peoj)le  :  their  temperament :  their  manners  :  thei)- 
habits  and  custom--  :  the  state  of  tin-  industries  and 
commerce  :  the  method  and  fa('i!it\  of  t!  ansi)ortation  : 
the  soil,  (dimate.  harxcsts.  war,  [)eace,  Hoods,  famine, 
pestilence, — all  the  conditions  of  man.  and  the  nation's 
inten'ourse  with  other  nations, — are  conditions  or 
forces  constituting"  great  factors  in  determining  the 
nation's  economic  ])o\vers,  and  modifying  or  intensify- 
ins:  the  intiuenee  of  other  forces — such  as  mon<'\',  new 
discoveries,  and  the  liki'.  For  instance,  if  Russia's 
volume  of  money  were  doubled,  the  immense  territory 
over  which  the  inhabitants  are  scattered,  the  devotion 
of  the  peasantry  to  agriculture,  the  slow  and  })lodding 
habits  and  [^hlignnitie  character  of  the  [)eo[)le,  and  the 
tardy  means  of  transjjortation,  would  render  impossible 
so  quick  an  impartation  of  vitality  to  trade   and  the  in- 


f>  FKKFATOKY C:HA1T£K  f'rKST- 

(iistnes  ;is  an  equal  increase  of  money  in  the  United 
>Ttates  would  do  here,  on  account  of  the  commercial 
habits  and  mercurial  character  of  the  people  an<l  the 
lapid  means  of  transportation.  The  failure  of  students 
of  the  subject  to  trace  the  hidden  causes  of  monetary 
phenomena  throuo:h  all  the  conditi(»ns  of  the  in- 
dustries, commerce,  and  nations  to  their  sources, 
has  resulted  in  such  an  accumulation  of  errors  that 
the  tioith  itself  emiiraced  in  the  various  tlie(n'ie> 
is  so  infectcil  with  errrn-  as  to  be  scarcely  pen-ept- 
il^le. 

The  onh'  ciUTecl  method  of  stuch'inif  the  subject  i> 
that  of  learning  and  observing  tlie  facts  and  conditions 
previous  to  and  contemporaneous  with  tinancial  i)he- 
nomena.  .ind  tracing  out  their  relations  with  each 
(»ther, 

Speculativ  c  [>hilo>oi)hy  ha-  in  the  past  entered  largely 
into  economic  science,  and  its  fruits  exist  in  the  form 
of  a  myriad  of  theories  embracing  a  compound  of 
truth  and  error. 

Aristotle,  Avho  wrote  over  two  thousand  ycar>  ago. 
embraced  both  the  speculative  and  inductive  methods 
of  investigation.  His  i)ro})Ositions  were  generally 
deductions  fioni  plu'noinena.  This  was  evidently  true 
in  his  essay  on  money,  wherein  he  expressed  some 
truths  which  lie  at  the  foundation  of  every  cor- 
rect monetar\'  system.  One  of  these  truths  is  that, 
the  use  of  a  thing,  no  matter  what  it  may  bi-. 
as  money,  is  a  use  entirely  different  from  the  use  of  it 
lis  a  connnodity.  Another  is  that,  money  is  a  medium 
of  conunercial  exchanges.  A  third  is  that,  money  i- 
not  the  nltimate  object  of  men — the  end  of  business, 
hut  i^  a  iiK'iin.'i  of  bnsine-^^,    bv   the   Use   or  handliuii"  of 


REVIEW  OF  AUTHORS.  7 

which  men  supply  themselves  with  the  necessaries  of 
life  and  develop  wealth. 

No  mind,  without  embracing  these  ideas,  can  frame 
a  correct  monct:uy  system  or  comprehend  its  phenom- 
ena. The  failure  of  statesmen  and  writers  on  political 
economy  to  observe  these  truths  has  filled  the  world 
with  vicious  theories  pregnant  with  the  seeds  of  finan- 
cial disease  and  inimical  to  the  growth  of  wealth  and 
the  highest  development  of  civilization. 

The  financial  distresses  of  England  from  1G89  to 
169(3  have  been  referred  to  often  by  that  class  of  thinkers 
who  clamor  for  a  uniform  standard  of  values,  as  con- 
clusive evidence  of  the  evils  of  debased  coins.  They 
claim  John  Locke  as  the  champion  of  standard  coins, 
because  he  proved  to  the  world  that  equal  weights  of 
silver  were  equal  in  value  to  equal  weights  of  equal 
fineness  ;  that  is,  that  equal  things  are  equal  to  each 
other.  This  astounding  triumph  of  logic  will  certainly 
meet  the  approbation  of  all  men.  But  it  by  no  means 
establishes  the  point  sought  to  be  gained  by  them.  If 
Enirland  had  debased  all  her  coin  alike  it  would  not 
have  left  the  country  as  the  purer  coins  did  during  that 
time,  and  yet  Mr.  Locke's  philosophy  would  have  ap- 
plied to  the  debased  coins  as  well  as  to  the  standard 
ones.  In  169(3  a  re-coinage  took  place  under  the  act 
of  Parliament,  restoring  the  metal  money  to  standard 
weight  and  fineness.  In  the  autumn  of  that  year  the 
financial  distress  began  to  disappear.  The  advocates 
of  a  uniform  standard  seize  upon  this  fact  as  an  irre- 
futable argument  to  prove  that  the  restoration  of  the 
standard  coins  removed  the  distress.  But  they  fail  to 
consider  the  powerful  effect  the  notes  of  the  Bank  of 
England  produced  upon  the  country.     The  Bank  Mas 


8  PREFATORY CHAPTER  FIRST. 

chartered  in  1694  and  by  1696  had  got  mto  full  opera- 
tion, and  her  issues  had  doubtless  largely  increased. 
Of  the  monetary  condition  of  the  last  named  year, 
Lord  Macaulay  wrote,  "The  upper  classes  seem  to 
have  lived  to  a  great  extent  on  credit.  Even  an  opu- 
lent man  seldom  had  the  means  of  discharging  the 
weekly  bills  of  his  baker  and  butcher.  A  promissory 
note,  however,  subscribed  by  such  a  man,  was  readily 
taken  in  the  district  where  his  means  and  character 
were  well  known.  The  notes  of  the  wealthy  money- 
changers of  Lombard  street  circulated  widely.  The 
paper  of  the  Bank  of  England  did  much  service.  *  * 
The  directors  soon  found  it  impossible  to  procure 
silver  to  meet  every  claim  which  was  made  on  them  in 
good  faith.  They  then  bethought  them  of  a  new  ex- 
pedient. They  made  a  call  of  twenty  per  cent,  on  the 
proprietors,  and  thus  raised  a  sum  which  enabled  them 
to  give  every  applicant  fifteen  per  cent,  in  milled  money 
on  what  was  due  to  him.  They  returned  him  his  note, 
after  making  a  minute  upon  it  that  part  had  been  paid." 
It  will  be  seen  from  this  that  the  notes  of  the  Bank  of 
England,  of  the  wealthy  money  changers,  and  opulent 
citizens,  served  the  place  of  coin,  and  to  them  is  attrib- 
utable more  than  to  anything  else  the  return  of  pros- 
perity. The  depletion  of  the  money  of  the  country, 
which  had  taken  jDlace  just  prior  to  this  time,  had  of 
necessity  so  reduced  values  in  England  as  to  stop  the 
outflow  of  coin  and  turn  the  balance  of  trade  in  her 
favor.  This  also  greatly  aided  in  restoring  the  mone- 
tary conditions  to  a  healthful  state.  The  re-coinage 
had  a  beneficial  effect,  not  in  making  the  coins  standard 
in  weight  and  fineness,  but  in  making  all  in  the  king- 
dom uniform.      Mr.  Locke  understood  the  powerful 


REVIEW  OF  AUTHOUS.  9 

effect  of  foreign  balances  on  a  nation's  finances,  but 
did  not  show  how  such  balances  were  produced  in  a 
nation's  favor  or  against  it. 

John  Law  enunciated  the  truth  that  nothing,  includ- 
ing the  precious  metals,  has  a  vailue  except  for  the  use 
to  which  it  is  applied.  The  failure  of  many  to  apply 
that  truth  has  led  them  to  not  understiind  the  cause  of 
the  depreciation  of  silver  since  its  demonetization  in 
Europe  and  the  United  States.  Bullionists  hold,  that 
the  precious  metals  are  worth,  as  money,  exactly  their 
value  in  the  arts.  In  other  words,  they  hold  that  the 
monetization  or  demonetization  of  them  does  not  affect 
their  value.  This  cannot  be  true  in  the  very  nature  of 
thiuirs,  because  the  one  increases  and  the  other  de- 
creases  its  uses,  this  increases  or  depreciates  demand 
for  it  and  this  necessarily  appreciates  or  depreciates  its 
value. 

Mr.  Law  said,  "Money  is  not  the  value  for  which 
goods  are  exchanged,  but  the  value  by  xohich  they  are 
exchanged.  "  It  is  true  that  money  is  not  the  ultimate 
object  of  business.  Even  the  capitalist  enters  into  his 
transactions,  not  for  the  purpose  of  getting  and  hoard- 
ing mone}^  like  the  miser,  but  to  invest  it  in  bonds  or 
stocks,  or  property  for  profit.  Yet  exchanges  made 
by  money  are  made  immediately  for  money,  the  ulti- 
mate object  being  to  use  the  money  as  a  meatis  of  ob- 
taining other  things  and  of  producing  wealth.  He  held 
that  a  nation's  money  need  not  be  such  as  would  cir- 
culate in  other  nations.  The  truth  of  this  has  been 
amply  proved  since  his  day  by  Russian,  Italian,  French, 
and  United  States  financiering. 

Law's  great  error  was  that  paper  money  should  be 


10  PREFATORY CHAPTER  FIRST. 

based  on  and  redeemable  in  something ;  that  any  val- 
uable property  would  serve  as  the  redemption  fund, 
and  laud,  being  the  most  substantial  and  useful  of  all 
property,  was  the  safest  of  all  bases.  Hence,  his  dis- 
astrous land  money  scheme.  Neither  the  paper  money 
issued  on  the  land,  nor  the  land  nor  titles  beino;  a  le^al 
tender,  the  paper  itself  came  no  nearer  being  money 
than  the  public  mind  made  it.  Hence,  when  men  re- 
fused to  take  it  for  debt  and  in  exchange  for  property, 
it  became  in  a  manner  worthless. 

Paper  money  ought  to  be  absolute,  irredeemable  le- 
gal tender  money  like  gold  and  silver.  Otherwise,  a 
reduction,  depreciation,  or  destruction  of  the  redemp- 
tion fund  injures  or  destroys  the  value  of  the  money. 
And  when  a  nation's  money  is  supplied  by  banks  of  is- 
sue, not  only  the  success  of  those  institutions,  but  the 
welfare  of  millions  depends  upon  the  wisdom  or  folly, 
the  economy  or  profligacy  of  those  who  may  happen 
to  direct  the  affairs  of  the  banks,  and  upon  the  acci- 
dents and  incidents  of  foreiii^n  trade. 

David  Hume  asserted  that  the  greater  or  less  plenty 
of  money  was  of  no  consequence.  This  assertion  alone 
shows  the  looseness  of  his  reasoning  and  the  casuality 
of  his  observations.  He  failed  here  to  consider  the 
effects  of  supply  and  demand.  At  another  place  he 
asserts  that,  "The  greater  plenty  of  money  may  even 
sometimes  be  a  loss  to  the  nation  in  its  commerce  with 
foreigners.  «  *  *  ^^^^j  jj^  general,  the  dear- 
ness  of  everything,  from  plenty  of  money,  is  a  disad- 
vantage which  attends  an  established  commerce,  and 
sets  bounds  to  it  in  every  country  by  enabling  poorer 
States  to  undersell  the  richer  in  all  foreign  markets.'* 


REVIEW  OF  AUTHORS.  11 

This  is  true  where  the  money  is  gold  and  silver  or 
paper  redeemable  in  them,  and  to  this  fact  is  attribu- 
table the  recurring  financial  crises  which  have  vibrated 
from  nation  to  nation  in  the  past,  where  such  money 
constituted  the  medium  of  exchange.  But  that  re- 
sult does  not,  cannot  flow  from  irredeemable  paper 
currency,  because,  no  matter  how  much  it  may  be  in- 
flated, it  does  not  inflate  coin  prices,  and,  hence,  does 
not,  on  account  of  prices,  produce  a  bad  influence  on 
commerce.  Because  of  the  above  named  phenomenon 
of  plenty  of  money,  coin  and  redeemable  paper,  in- 
ducino;  foreimi  balances  aojainst  the  nation  or  reducing 
its  exports,  Mr.  Hume  doubted  the  propriety  of  having 
banks  and  questioned  the  advantages  of  abundance  of 
money. 

In  another  place  he  asserts  that  without  an  increase 
of  the  volume  of  mony  in  a  nation  whose  population 
and  business  increase,  a  gradual  fall  of  prices  will  en- 
sue.    This  is  true. 

Adam  Smith  held  the  truth  that,  "Gold  and  silver, 
like  every  other  commodity,  vary  in  value  ;  are  some- 
times cheaper  and  sometimes  dearer,  sometimes  easier 
and  sometimes  of  more  difficult  purchase."  That  as  a 
standard  or  measure  of  values  their  capacities  are  al- 
ways changing.  He,  however,  held  the  absurd  theory 
that  labor  was  the  true  measure  of  values.  He  prop- 
erly distinguished  the  nominal  from  the  exchange  value 
of  money.  He  also  held  that  money  did  not  consti- 
tute the  revenues  of  society ;  that  it  was  but  the  ex- 
change medium  ;  the  thing  which  puts  industry  in 
motion.  He  considered  paper  money  issued  by  banks 
economic,  inasmuch  as  they  would,    as    he    supposed, 


12  PREFATORY CHAPTER  FIRST. 

supplant  an  amount  of  gold  and  silver  equal  to  their 
issues.  This  would  l)e  true  in  some  cases,  and  in  some 
cases  not.  So  long  as  the  total  sum  of  a  nation's 
money,  coin  and  paper,  remains  inadequate  to  advance 
the  coin  prices  in  that  nation  above  those  of  other 
nations  the  coin  would  not  be  exported  unless  it  bore 
a  high  premium  over  the  paper.  Otherwise  it  would 
be  exi)orted. 

Dugald  Stewart  held  that  the  commodity  value  of 
gold  and  silver  was  different  from  the  money  value 
thereof ;  that  commodity  value  was  not  necessary  to 
money.  This  idea  has  been  constantly  fought  by  bul- 
lionists,  but  its  truth  has  been  irrefutably  established 
by  the  financial  histories  of  several  nations. 

The  advance  of  gold  premium  and  the  stringency  of 
monev  matters  in  Enojland  in  1809  and  1810  caused 
alarm.  The  House  of  Commons  appointed  a  committee 
of  twenty-one  members,  many  of  them  distinguished 
statesmen,  "To  inquire  into  the  cause  of  the  high  price 
of  gold  bullion,  and  to  take  into  consideration  the  state 
of  the  circulating  medium,  and  of  the  exchanges  be- 
tween Great  Britain  and  foreign  parts."  The  report 
of  that  committee,  submitted  June  8th,  A.  D.  1810,  is 
pregnant  with  truth  and  error.     They  said  : 

"It  is  important  to  observe  that  when  the  bank  was 
bound  to  answer  its  notes  in  specie  on  demand,  the 
state  of  foreign  exchanges  and  the  price  of  gold  did 
most  materially  influence  its  conduct  in  the  issue  of  its 
notes.  *  *  *  Xhe  Directors  of  the  Bank,  having 
their  apprehensions  excited  by  the  reduction  of  their 
stock  of  gold,  and  being  able  to  replace  their  loss  only 
by  restricted  purchases  of   bullion   at   a   very  losing 


REVIEW  OF  AUTHORS.  13 

price,  naturally  contracted  their  issues  of  paper,  and 
thus  gave  the  remaining  paper  as  well  as  the  coin 
for  which  it  was  iuterohangeable,  an  increased  value." 
They  comprehended  the  powerful  effects  of  foreign 
balances  upon  the  finances  of  a  nation  using  coin  or  a 
paper  redeemable  in  coin,  and  the  equally  powerful  ef- 
fect of  such  a  paper  on  the  foreign  balances.  They 
saw  that  the  reduction  of  the  amount  of  specie  in  the 
vaults  of  the  banks  of  issue  necessitated  a  contraction 
of  the  currency  and  that  this  reduced  prices  and  in- 
creased the  purchasing  power  of  both  coin  and  paper 
by  reason  of  the  reduction  of  the  aggregate  volume  of 
money.  They  erroneously  attributed  the  coin  pre- 
mium to  the  quantity  of  paper  money,  when,  in  fact, 
it  resulted  from  the  war  and  the  great  scarcity  of  the 
precious  metals  in  the  kingdom  caused  by  the  exporta- 
tion of  large  quantities  of  them  for  grain  and  for  the 
support  of  the  armies  on  the  continent.  The  bank 
directors  and  some  of  the  merchants  who  testified  be- 
fore the  committee  held  that,  so  long  as  the  bank 
issued  and  loaned  money  on  real  commercial  trans- 
actions to  be  paid  in  a  short  time,  there  could  not  by 
that  means  be  an  over-issue.  The  committee  looked 
upon  this  "as  pregnant  Avith  dangerous  consequences 
in  practice."  The  history  of  such  issues  proved  to  be 
very  beneficial  to  the  country  during  suspension  of 
specie  payments.  The  doctrine  of  the  bank  directors 
and  merchants  above  referred  to  could  be  mischievous 
only  when  applied  to  issues  of  redeemable  paper.  The 
committee  held  the  opinion  that  there  was  too  much 
currency,  and  the  most  unquestionable  symi)toni  of  it 
was  the  high  price  of  bullion  and  the  low  state  of  con- 


14  PREFATORY — CHAPTER  FIRST. 

tinental  exchanges.  The  history  of  that  time  pointedly 
refutes  this  opinion.  The  imports  of  1810  were  £7,- 
000,000  more  and  the  exports  £3,000,000  less  than  for 
the  preceding  year.  This  was  caused  in  part  by  the 
failure  of  the  crops  in  England,  necessitating  the  ex- 
portation of  large  sums  of  coin  to  pay  for  grain.  This, 
with  the  heavy  demand  for  coin  to  support  the  armies 
on  the  continent,  advanced  the  price  of  gold  regardless 
of  the  quantity  of  paper.  That  the  quantity  of  paper 
money  in  circulation  did  not  cause  the  advance  of  coin 
premium  is  evidenced  by  the  fact  that  £6,000,000  ex- 
chequer bills  Avere  issued  and  Bank  of  England  issues 
increased  £2,300,000  simultaneously  with  a  consider- 
able decline  of  gold  premium  in  1811.    • 

The  committee  held  that  a  proper  reduction  of  the 
quantity  of  irredeemable  paper  would  produce  a  par 
of  it  with  gold.  This  would  result  under  some  circum- 
stances  and  under  others  it  would  not.  With  a  firmly 
established  government,  in  peace,  when  there  was  no 
demand  for  coin  to  meet  foreign  obligations  or  bal- 
ances, or  to  pay  for  imported  goods,  the  commit- 
tee's rule  would  apply  to  such  paper ;  but  if  the  gov- 
ernment were  seriously  threatened,  of  if  there  were 
heavy  demands  for  coin  to  meet  foreign  obligations 
and  an  inadequate  supply  of  it,  no  amount  of  reduc- 
tion of  the  volume  of  such  currency  would  immedi- 
ately bring  it  to  par  with  coin,  for  the  simple  reason 
that  the  paper  would  not  be  redeemable  in  coin.  This 
committee,  and  after  them  Henry  Thornton  and  many 
others,  entertained  a  distinction  between  what  is  called 
real  and  fictitious  bills,  intimating  that  paper  money 
issued  upon  the  latter,   not  representing  merchandise,. 


REVIEW  OF  AUTHORS.  15 

inflates  and  becomes  vicious.  The  idea  advanced  by 
them  is  that  an  inflation,  so  produced,  enhances  prices, 
induces  hirger  imports  or  smaller  exports,  or  both, 
causes  foreign  balances  against  the  country,  conse- 
quent expoilations  of  coin,  reduction  of  bank  re- 
serves, and  a  collapse.  This  is  true  only  of  a  redeem- 
able currency,  and  then  only  when  the  inflation  is  suf- 
ficient to  advance  prices  above  those  of  other  nations. 
Whether  the  banks  might  thus  inflate  their  issues  on 
sufiicient  or  insuflicient  reserves  of  coin,  would  make 
but  little  difference  in  the  effects  on  foreign  commerce, 
but  it  would  ultimately  materially  affect  the  value  of 
the  paper. 

There  is  no  such  thing  as  paper  money  representing 
merchandise.  All  money,  paper  as  well  as  coin,  is  an 
absolute  power  and  represents  nothing  except  when  it 
is  redeemable  money,  iri  which  case  it  may  be  said  to 
represent  the  redemption  fund,  but  nothing  more. 
Lord  King,  in  1803,  stated  the  following  important 
truth : 

*'The  use  of  a  paper  currency  in  any  particular 
country,  so  far  as  it  displaces  coin,  which  would  other- 
wise be  employed,  diminishes  the  demand  for  gold  and 
silver  for  the  purpose  of  coinage,  and  has  precisely  the 
same  effect  in  reducinsr  their  general  value  as  an  actual 
increase  of  their  quantity  to  the  same  amount.  On 
the  supposition,  therefore,  of  the  whole  quantity  of 
gold  and  silver  remaining  the  same,  thev  must,  in  a 
certain  degree,  be  rendered  cheap  by  every  increase  of 
paper  currency." 

This  is  an  important  truth,  but  many  fail  to  dis- 
tinguish the  value  of  the  precious  metals  with  reference 


16  PREFATORY CHAPTER  FIRST. 

to  proiDerty  from  their  value  with  reference  to  paper 
money.  A  par  of  paper  and  gold  does  not  indicate 
that  the  latter  is  cheap  ;  it  indicates  the  exact  opposite. 
When  gold  is  now  but  2  per  cent,  premium  many  peo- 
ple imagine  it  is  cheap  ;  it  is  not  true.  A  dollar  in  gold 
is  100  per  cent,  dearer  than  it  was  ten  years  ago,  be- 
cause it  ^vill  buy  twice  as  much  property  now  as  then. 
Mr.  Huskisson  held  that,  "It  is  of  the  essence  of 
money  to  possess  intrinsic  value."  If  he  meant  in- 
trinsic value  as  money,  that  is,  that  it  must  pos- 
sess qualities  fitted  to  use  as  money,  then  he  was 
correct.  But  if  he  meant  that  it  must  possess  com- 
modity' value,  he  uttered  a  vicious  error  which  has  led 
nations  into  much  distress.  It  is  evident,  however, 
that  his  idea  was  that  money  must  possess  a  commod- 
ity or  property  value,  from  his  holding  that  paper  cur- 
rency was  not  money,  but  the  representative  of  money. 
Those  theories  of  his  have  been  so  effectually  refuted 
by  history  as  to  scarcely  need  an  answer.  The  legal 
tender  currency  of  the  United  States  possesses  no  com- 
modity value  ;  before  the  Resumption  Act  was  passed 
it  did  not  represent  coin,  but  was  then  and  is  now 
money  to  all  intents  and  purposes.  He  held  the  truth 
that,  if  a  country's  money  consisted  of  gold  exclusively, 
and  if  the  quantity  were  so  increased  as  to  advance 
prices  there  above  those  of  other  nations,  the  result 
Avould  be  importations  of  merchandise  into,  and  export- 
ations  of  coin  from,  that  nation  until  prices  there 
should  be  reduced  to  about  the  same  as  those  in  other 
nations.  He  held  that  the  same  result  would  follow 
an  increase  of  the  paper  money  of  a  nation,  with  the 
addition  that  it  would  cause  gold  to  rise  to  premium. 


REVIEW  OF  AUTHORS.  17 

This  proposition  is  true  only  in  part.  If  the  paper 
were  redeemable  paper,  that  result  would  follow  with 
the  exception  that  under  certain  conditions  gold  would 
not  rise  to  a  premium.  If  the  paper  were  irredeem- 
able legal  tender,  prices  would  advance,  but  the  in- 
ducements to  import  would  not  be  increased,  and  gold 
would,  under  some  contemporaneous  conditions,  rise 
to  a  premium,  and  under  athers  it  would  not.  If  a 
nation  reduce  the  quantity  of  pure  metal  in  its  units  of 
value  below  the  quantity  in  its  standard  unit  of  the 
same  denomination,  the  latter  will  generally  be  at  a 
premium  over  the  former,  but  in  all  other  respects  the 
same  laws  of  value  or  purchasing  power  govern  the  de- 
preciated coin  and  its  effects  on  internal  business  and 
foreign  commerce  that  apply  to  irredeemable  legal  ten- 
der paper  money. 

David  Ricardo  thought  that  the  seignorage  charged 
by  governments,  no  matter  how  much,  would  make  the 
coin  equal  in  value  to  an  equal  weight  of  the  precious 
metal  in  the  form  of  bullion,  provided  the  quantity  of 
the  precious  metal  supplied  by  alloy  in  the  coin  should 
not  exceed  in  value  the  seignorage  charged.  He  at- 
tributed the  value  assumed  by  paper  money  to  the 
same  cause — seignorage.  It  is  remarkable  that  so 
acute  an  observer  should  so  grossly  misunderstand  the 
causes  which  produce  value.  It  is  the  fitness  of  a  thing 
for  use  that  is  properly  called  intrinsic  value  ;  this 
brings  it  into  use  and  its  use  gives  it  a  money  value. 
Hence,  in  so  far  as  debased  coins  and  paper  may  serve 
the  purposes  of  money,  they  will  be  valuable.  But  if 
there  be  a  special  use  for  pure  metal,  or  a  standard 
coin,  which  cannot  be  served  by  debased  coin  or  paper. 


18  PREFATORY CHAPTER  FIRST. 

then  the  standard  com  and  bullion  will  be  at  a  premium 
unless  the  supply  of  them  is  as  nearly  equal  to  the  de- 
mand for  them  as  the  supply  of  the  cheaper  money  is  to 
the  demand  for  it.  Mr.  Ricardo  held  that  by  a  nation's 
issuing  paper  which  would  take  the  place  of  coin,  the 
country,  thereby,  would  become  richer  to  the  extent  of  • 
the  coin  so  supplanted  by  paper.  This  would  be  true 
only  if  it  were  irredeemable  paper,  because  in  that 
case  no  coin  would  be  required  to  redeem  it.  The  coin 
would  be  exported  and  merchandise  brought  in  and  yet 
the  nation  would  have  as  much  money  as  before.  But 
if  the  paper  were  to  be  redeemed,  it  would  be  a  debt 
to  discharge  which  the  coin  supplanted  would  have  to 
be  replaced. 

Lord  Liverpool,  in  a  letter  to  the  Bank  of  England, 
attributed  the  crisis  of  1825  and  distress  of  1826  in 
England  to  speculation.  This  is  not  true.  It  is  true 
that  the  heavy  investments  of  capitalists  in  the  South 
American  mines  caused  the  exportation  of  vast  amounts 
of  coin  to  meet  their  obligations  ;  but  it  was  the  de- 
pletion  of  the  bank  reserves  of  coin,  caused  by  the  ex- 
portation of  gold,  causing  a  heavy  contraction  of  the 
currency,  which  precipitated  the  crisis  and  continued 
the  distress.  If  the  currency  had  been  a  legal  tender, 
the  exportation  of  the  coin  and  the  speculations  referred 
to  would  not  have  produced  the  terrible  and  general  finan- 
cial distress  of  1825-26.  He  and  numerous  others  have 
with  great  approbation  referred  to  the  successful  oper- 
ation of  the  Scotch  banking  system,  but  none  of  them 
assign  satisfactory  reasons  for  the  success  of  those 
banks.  Those  banks  are  savings  banks  as  well  as  banks 
of  deposit  and  issue.     Thus,  nearly  all  the  money  of 


REVIEW  OF  AUTHORS.  19 

Scotland  passes  through  them,  and  they,  in  a  great 
measure,  control  it.  They  issue  small  notes,  thus  ac- 
commodating the  people  with  a  currency  suited  to  the 
myriad  small  transactions  of  the  country.  The  direc- 
tors and  officers  have  been  uniforml}^  honest  and  saga- 
cious, Scotland  is  not  the  center  of  the  world's  com- 
merce as  England  is.  Much  of  her  heavy  foreign 
transactions  ai"e  done  through  English  houses.  Her 
money  settles  her  dealings  with  English  houses 
and  thus  the  latter  form  a  breakwater  for  Scotch 
banks  as-ainst  the  adverse  tides  of  financial  affairs. 
These  several  facts,  especially  the  latter,  constitute  the 
principal  reasons  of  the  uniform  success  of  the  Scotch 
banking  system. 

Mr.  Tooke,  in  his  evidence  before  the  Pai  liamentary 
committee  of  1832,  said  that,  "All  paper  money  should 
be  issued  by  the  government  on  the  same  ground  that 
coin  is."  He  understood  two  great  evils  of  banks  of 
issue,  to-wit :  that  depletion  of  their  reserves  would 
affect  the  volume  and  value  of  their  issues,  and  that 
they  are  unnecessarily  expensive  institutions.  The 
Parliamentary  committee  of  1832  threw  very  little 
light  on  the  subject  of  money.  The  principal  result  of 
their  labors  was  not  the  establishment  of  a  system 
upon  sound  principles,  but  a  patching  up  of  banking 
laws  and  regulations. 

There  were  committees  again  in  1844  and  1847,  the 
results  of  whose  investigations,  as  usual,  were  disquisi- 
tions upon  banking  rules  and  regulations,  rather  than 
an  investigation  of  the  fundamental  laws  of  monetary 
science.     No  fundamental  chano;e  of  svstem  was  made. 

Thomas  Tooke,  Mr.  Wilson,  and  many  others,  held 


20  PREFATORY CHAPTER  FIRST. 

that  the  quantity  of  currency  did  not  affect  prices. 
This  error  has  been  so  effectually  refuted  by  financial 
and  commercial  history  that  it  needs  no  answer. 

J.  E..  McCuUoch  held  that  the  value  or  purchasing 
power  of  any  kind  of  money,  in  limited  supply,  was 
determined  by  the  law  of  supply  and  demand,  but  that 
when  its  supply  was  free,  its  value  was  determined  by 
the  cost  of  its  production.  The  first  rule  would  have 
been  true  if  he  had  said  that  the  value,  or  purchasing 
power,  of  money  always  depended  upon  the  demand  for 
it  and  the  supply  of  it.  His  second  rule  named  is  not  true 
from  the  fact  that  if  there  was  no  demand  at  all  for  the 
money  it  w^ould  be  worth  nothing,  no  matter  what  the  cost 
of  its  production  might  be.  He  held  that  the  circulation 
of  redeemable  bank  paper  was  dependent  upon  confi- 
dence in  the  ability  of  the  issuers  to  redeem  it.  This 
is  true  only  of  those  who  take  it  to  present  for  redemp- 
tion. The  great  body  of  the  people  of  a  nation  take^ 
bank  paper  simply  because  they  believe  others  will 
take  it  also  in  exchange  for  commodities  or  in  pay- 
ment of  debts.  He  held  that  that  which  made  an  irre- 
deemable currency  circulate  was  the  law  making  it  a 
legal  tender,  and  that  such  a  paper  might  be  kept  at 
par  with  coin  by  properly  contracting  the  issues,  as  in- 
flation might  be  indicated  by  the  state  of  the  exchanges. 

The  idea  of  the  great  importance  of  par  has  distressed 
the  minds  of  most  recent  writers  on  the  subject  of 
money,  and  the  numerous  schemes  and  efforts  to  pro- 
duce and  sustain  a  par  of  coin  and  paper  have  cursed 
the  nations  for  generations.  Between  an  irredeemable 
paper  currency  and  coin,  par  may  have  an  accidental 
but  not  a  scientific  connection  ;  and  with  a  redeemable 


REVIEW  OF  AUTHORS.  21 

paper,  tlie  effort  to  produce  and  sustain  par  subjects 
the  currency  to  constant  mutations  and  inflicts  upon 
nations  financial  panics  and  crises.  He  also  held  that 
paper  monej'^  was  cheaper  for  a  nation  than  gold  and 
silver  money. 

John  Stuart  Mill  held  that  an  increase  of  the  volume 
of  money  would  advance  prices  in  the  same  ratio.  This 
is  not  true.  An  increase  of  money  increases  both  pro- 
duction and  consumption,  but  the  former  more  than 
the  latter.  This  is  proven  by  the  rapid  increase  of  im- 
provements and  substantial  wealth  in  a  nation,  follow- 
ing an  increase  of  money.  The  increased  volume  of 
'money  circulates  to  a  wider  extent  and  fills  innumer- 
able reservoirs  (the  pockets  of  laborers  and  the  poor) 
before  it  flows  freely  and  continuously  through  the 
channels  of  trade.  Thus  the  increase  of  property  and 
the  wider  scope  of  the  circulation  modifies  the  force  of 
the  volume  of  money  on  prices.  He  also  held  that  the 
values  of  everything,  gold  and  silver  included,  were 
determined  by  the  cost  of  production.  This  is  an  er- 
ror common  to  political  economists.  It  is  not  true  in 
anything.  Go  into  the  corn  and  wheat  districts.  In 
years  of  plenty,  corn  is  worth  scarcely  anything.  In 
many  places  it  is  sometimes  so  far  from  being  worth 
the  cost  of  production  that  it  cannot  be  sold  at  any 
price  at  all.  It  has  frequently  been  burnt  in  the  West 
to  get  rid  of  it.  In  years  of  failure,  the  lucky  farmer 
who  produces  a  good  crop  realizes  two,  three,  or  four 
times  the  cost  of  producing  his  grain.  The  successful 
operators  in  silver  lodes  and  gold  mines  amass  immense 
fortunes  from  the  prq/its  on  production,  while  the  less 
favored  sink  ten  dollars  for  every  one  produced. 


22  PREFATORY CHAPTER  FIRST^ 

Examine  the  markets  of  the  United  States,  find  out 
the  prices  of  articles,  ascertain  the  cost  of  then'  pro- 
duction and  then  judge  of  the  causes  which  fix  prices. 
The  markets  fluctuate  during  the  four  seasons.  If  cost 
of  producing  a  crop  of  cereals,  cattle,  codfish,  cranber- 
ries, cotton,  sugar,  or  any  other  thing,  fixed  prices,  then 
there  could  be  no  change  in  the  market  prices  of  things 
until  a  new  crop  came  in,  and  then  the  change  could 
apply  only  to  the  new  crop,  because  the  cost  of  pro- 
ducing the  old  crop  had  previously  been  fixed  and  could 
not  be  changed.  The  changing  demand  and  supply, 
and  prospective  demand  and  supply  fix  values.  He  held 
that  credit  acted  upon  prices — ^that  an  increase  or  de- 
crease of  credits,  other  things  remaining  the  same, 
would  appreciate  or  depress  prices.  This  is  true,  be- 
cause credit  facilitates,  increases  exchanging  of  prop- 
erty, thus  performing  the  functions  "of  money  m  a  lim- 
ited degree,  and  thus  far  it  affects  prices. 

Mr.  Mill  held  substantially  the  same  views  of  incon- 
vertible paper  that  J.  R.  McCulloch  did,  and  fell  into 
the  same  error  about  the  importance  of  par  and  the 
methods  of  producing  and  ^astainmg  it.  He  stated,  in 
regard  to  an  inconvertible  paper,  that,  "The  rise  of 
prices  (produced  by  it)  will  not,  as  in  the  cases  (of 
convertil)le  paper)  before  examined,  stimulate  import 
and  discourage  export  The  imports  and  exports  are 
determined  by  the  metallic  prices  of  things,  not  by  the 
paper  prices  ;  and  it  is  ordy  when  the  paper  is  exchang- 
abie  at  pleasure  for  the  metals  that  paper  prices  and 
metallic  prices  must  correspond,  " 

n.  D.  Macleod  held   that   money  represented  debt. 
This  IS  even  a  more  glaring  absurdity  than  that  paper 


REVIEW  OF  AUTHORS.  23 

money  is  symbolic,  representing  merchandise.  Money, 
no  matter  what  the  form  or  kind,  does  not  represent  any- 
thmg.  It  is  an  absolute  distinct  power  performing  its 
functions  according  to  its  own  nature. 

Henry  Fawcctt  held  that,  "General  prices  depend 
upon  the  quantity  of  money  in  circulation  compared 
with  the  wealth  bought  and  sold  with  money,  and  also 
upon  the  frcquciu  y  with  winch  this  wealth  is  bought 
and  sold  before  it  is  consumed.  ' 

The  correct  statement  of  the  effect  of  money  on 
prices  is,  that  the  quantity  of  money  as  compared  with 
the  quantity  in  kind  (not  value)  i)f  property  in  a  na- 
tion and  the  conditions  of  the  country  and  the  people 
fix  prices.  The  frequency  of  exchanges  is  not  a  cause 
but  an  effect  of  the  quantity  of  money  or  credit,  or 
both.  He  failed  to  consider  the  powerful  effects  of 
the  accidents,  incidents,  and  changing  conditions  of  a 
nation  on  prices.  He  believed  that  an  incojv,.rtible 
currency  might,  under  exceptional  circumstances,  be 
made  to  serve  all  the  purposes  of  a  redeemable  curren- 
cy, for  a  short  time,  and  not  disturb  the  finances  of  a 
country,  if  kci)t  within  proper  limit.  He  referred  to 
the  depreciated  currency  of  the  American  Revolution 
as  an  example  of  the  abuse  of  such  currency.  • 

There  are  two  jcasoiis  why  no  money  that  might 
have  been  issued  by  the  United  States  then,  except 
^old  and  silver,  could  have  been  received  with  favor  or 
worth  much  :  1st,  The  bond  of  union  was  of  such  a  slack 
character  that  the  United  States  possessed  scarcely  any 
political  or  legal  poAvers  and  consequently  had  no  ade- 
quate means  of  enforcing  the  acts  of  Congress.  It 
had  no  power  to  make  paper  money  a  legal  tender. 
Certain  of  the  States  made  their  jjro  rata  part  of  the 


24  PREFATORY CHAPTER  FIRST. 

paper  a  legal  tender,  but  this  gave  it  the  character  of 
local  currency,  and,  outside  the  borders  of  each  State, 
that  portion  of  the  paper  so  made  a  legal  tender  therein 
was  not  a  legal  tender,  hence,  worthless  when  it  got 
abroad,  except  in  so  far  as  confidence  of  the  general 
public  in  the  ultimate  success  of  the  revolution  gave 
it  value.  2nd,  The  vicissitudes  of  the  war,  the  adver- 
sities of  the  new  republic,  the  almost  hopeless  and 
often  apparently  futile  effort  to  establish  the  indepen- 
dence of  the  States,  the  general  want  of  confidence 
in  a  successful  result  of  the  war  created  a  suspicion 
of  failure  in  every  State  effort  and  act.  Hence 
the  worthlessness  of  the  Continental  money.  That 
these  were  the  true  causes  of  the  depreciation  of 
that  money  is  evident  from  the  fact  that  the  issuance 
by  Congress  of  a  new  kind  of  money  in  the  latter  part 
of  the  war,  redeemable  in  coin,  met  with  scarcely  any 
better  success  than  the  other  kind.  No  candid  man 
will,  understandingly,  bring  forward  the  Continental 
money  as  an  argument  against  legal  tender  money  is- 
sued by  a  government  possessing  full  and  unquestioned 
political  and  legal  powers,  such  as  the  United  States 
now  enjoy. 

W.  Stanley  Jevons  refers  to  inconvertible  paper  mon- 
ey's acquiring  a  value  as  an  abnormal  phenomenon.  It 
is  no  more  abnormal  than  that  of  the  Indian  wampum's 
assuming  a  value.  The  very  same  thing  which  makes 
gold  and  silver  assume  a  value  as  money  makes  incon- 
vertible paper  assume  value  as  money.  It  is  the  use 
of  the  thing.  If  a  surgeon  wanted  lint  to  staunch  a 
bleeding  wound  to  save  a  life,  gold  would  not  do  ;  he 
would  give  gold  for  the  lint.  Thus  the  lint,  other- 
wise useless  and  valueless,  would  assume  a  value  for  that 


REVIEW  OF  AUTHORS.  25 

use.  Commerce  requires  money — it  is  indispensable  to 
serve  as  a  medium  of  exchanges.  Anything  which  will 
well  serve  that  end  may  be  used  for  that  purpose  and 
the  use  of  it  thus  gives  it  a  value  as  money.  Incon- 
vertible legal  tender  paper  serves  the  purpose  well ; 
hence,  it  assumes  a  value  as  money.  He  held  the  same 
theory  regarding  the  method  of  holding  an  irredeem- 
able paper  at  par  with  coin  that  several  others  herein 
before  named  did.  Mr.  Jevons  understood  the  fact 
that  redeemable  bank  paper,  when  inflated,  raised  the 
coin  prices  of  commodities  in  the  nation,  turned  for- 
eign balances  against  it,  and  was  thus  the  prolific  par- 
ent of  financial  panics  and  crises. 

Francis  AVayland  appears,  in  one  part  of  his  Elements 
of  Political  Econotny,  to  have  fallen  into  the  common 
error  that  values  are  determined  by  the  cost  of  pro- 
duction;  but  a  few  pages  further  on,  he  asserts  the 
truth  that,  "If  the  amount  (of  specie  in  a  nation)  be 
increased,  its  value  will  fall.  If  the  amount  be  dimin- 
ished, its  value  will  rise.  "  He  also  advances  the  truth 
that  specie  may  be  higher — that  is,  its  purchasing  pow- 
er may  be  greater  in  one  nation  than  in  another  at  the 
same  point  of  time.  It  is  evident  from  a  thorough  ex- 
amination of  his  theory  that  while  he  said  the  values  of 
gold  and  silver  were  the  cost  of  their  production,  he 
meant  that  their  values  were  the  cost  of  i\\Q\r  purchase. 

He  held  that  the  purchasing  power  of  money  and  the 
prices  of  merchandise  were  determined  by  the  relative 
quantities  of  money  and  property  in  a  nation,  and  that 
paper  money  was  economic. 

Francis  Bowen  holds  money  to  be  unproductive  cap- 
ital. He  and  a  number  of  other  writers  seem  never  to 
have  comprehended  the  immense  jDower  of  money  as  a 


26  PREFATORY CHAPTER  FIRST. 

force  contributing  to  the  production  of  wealth.  Money 
and  men  constitute  the  capital  of  a  nation.  Man,  by 
the  use  of  money,  is  enabled  to  combnie  and  apply  his 
mental  and  physical  powers  in  production.  Thus  the 
varied  wealth  of  a  nation,  material,  artistic,  scientific, 
and  mental  is  developed. 

Mr.  Bowen  states  that,  "Money  is  even  now  only  a 
hypothetical  or  abstract  medium  of  exchange  in  all  the 
larger  transactions  of  commerce.  I  almost  anticipate 
the  time,  in  the  progi'ess  of  invention  and  discovery  of 
new  expedients  and  facilities  in  commerce,  when  it  will 
become  so  universally." 

He  evidently  failed  to  distinguish  between  the  func- 
tions of  money  as  a  measure  of  values  and  as  a  medium 
of  exchange.  The  former  function  is  passive  and  is 
applied  by  a  mental  comparison.  The  latter  function 
of  money  is  an  active  power  emitted  from  its  circula- 
tion, operating  upon  prices  and  every  material  interest 
of  the  nation.  Money  is  not  a  hypothetical  or  abstract 
medium  of  exchange  in  large  transactions,  as  Mr.  Bow- 
en  supposes.  Exchanges  of  property  are  made  by 
three,  and  only  three,  means  besides  that  of  barter: 
1st,  The  actual  passing  of  money  between  the  contract- 
ing parties  ;  2nd,  By  the  passing  of  the  title  to  money 
by  means  of  checks,  drafts,  etc.,  for  money  actually 
owned  by  the  party  making  these  papers  ;  3rd,  By  credit. 
There  is  nothing  hypothetical  or  abstract  here.  By  the 
second  means  of  exchanging,  the  money  is  not  actually 
handled,  but  its  title  passes  by  means  of  the  title  pa- 
pers, checks,  drafts,  etc.  By  the  third  means,  in  the 
form  of  bills,  notes,  accounts,  etc.,  there  is  in  point  of 
fact  no  hypothecation  except  that  of  credit.  It  is  plain 
bald  credit,  creating  obligations,  promises  to  pay,  and 


REVIEAV  OF  AUTHORS.  27 

in  consideration  of,  and  by  means  of,  these  obligations, 
promises,  the  exchanges  are  made.  Mr.  Bowen  held 
substantially  the  same  theory  about  inconvertible  paper 
money  that  Mill,  MoCulloch  and  Tooke  entertained. 

Wm.  G.  Summer  advances  substantially  the  same 
principles  reported  by  the  British  Bullion  Committee 
of  1810,  in  regard  to  foreign  balances,  outflows  of  coin 
and  inconvertible  paper  currency. 

A.  R.  Peery  endeavored  to  show  the  distinctions 
which  exist  between  the  functions  of  money  as  a  meas- 
ure of  values  and  as  a  medium  of  exchanges.  Aside 
from  this,  his  theories  were  but  old  ones  redressed. 

Many  other  Americans  have  "WTitten  books  and  pam- 
phlets on  the  subject  of  money.  But  few  of  them, 
however,  have  done  more  than  revamp  old  theories. 

Hon.  Gary  Baird,  of  Philadelphia,  and  many  others 
advocate  a  legal  tender  currency,  issued  by  govern- 
ment, and  made  interconvertible  with  Ioav  interest- 
bearing  bonds.  Such  a  system  would  subject  the  cur- 
rency to  constant  chan<jes  in  the  size  of  volume,  thus 
afflicting  the  country  with  one  of  the  greatest  evils  of 
the  redeemable  bank  paper  system. 

Hon.  Briton  A.  Hill,  of  St.  Louis,  is  properly  termed 
the  champion  of  the  absolute  legal  tender  paper  sys- 
tem. His  book,  entitled  Absolute  Money ^  is,  in  many 
respects,  an  able  work,  and  is  worthy  a  place  in  the 
library  of  every  student  of  monetary  science.  Money 
is  his  theme,  and  in  his  fixed  attention  to  it  he  appears 
to  have  lost  siirht  of  the  immense  force  with  which  the 
accidents  and  conditions  of  nations  act  upon  the  indus- 
tries, commerce,  and  values.  His  central  idea,  though 
not  new,  is  very  well  sustained  by  scientific  reasons  ;  it 
is  better  sustained  by  his  references  to  history.     The 


28  PREFATORY CHAPTER  FIRST. 

idea  of  an  absolute  paper  money  is  not  new.  The  seed 
of  this  idea  existed  in  iron  money,  salt  money,  wood 
money,  etc.  It  germinated  in  the  Bank  of  Venice  in 
the  12th  century,  in  the  form  of  a  semi-legal  tender 
paper.  The  suspension  of  specie  payments  in  England 
and  the  legal  tender  character  of  Bank  of  England  pa- 
per from  1797  to  1820  gave  it  growth.  Sir  A.  Alison, 
the  English  historian,  entertained  a  dimly  outlined  con- 
ception of  such  a  money.  Our  forefathers,  in  creating 
the  continental  money,  approached  nearly  up  to  the 
standard  of  the  absolute  legal  tender  paper  theory,  and 
the  Congress  of  the  U.  S.,  in  1862,  improved  slightly 
on  the  continental  money  system.  With  all  these  pre- 
cedents and  successful  experiments  it  required  no  great 
stretch  of  the  imagination  to  seize  the  idea  of  absolute 
paper  money  from  the  system  of  legal  tenders  irre- 
deemal)le  for  an  indefinite  space  of  time.  The  idea  of 
an  absolute  paper  money  is  logically  deducible  from 
the  uses,  powers,  nature,  and  functions  of  money,  and 
is  as  consistent  with  reason  as  the  idea  of  any  absolute 
money  the  nominal  value  of  which  is  fixed  by  law. 

The  last  work  I  shall  notice  is  that  of  Henry  V. 
Poor,  entitled  Money ;  its  Laws  and  History.  He 
is  a  bullionist  in  theory  and  has  not  been  able  to  dis- 
tinguish between  the  science  of  money  proper  and  the 
art  and  science  of  banking.  He  is  a  great  critic.  Of 
his  623  pages,  365  are  taken  up  in  quotations  from, 
and  flippant  criticisms  of,  men  who  have  deservedly 
ranked  high  as  authors,  and  in  unmeasured  abuses  and 
scandalous  denunciations  of,  and  attacks  upon  political 
parties,  sections  of  the  Union  and  eminent  men  whose 
memories  millions  of  Americans  cherish  and  revere. 

His  work  is  valuable  principally  for  its  extracts  from 


REVIEW  OF  AUTHORS.  29 

other  authors,  disquisitions  upon  the  art  and  science  of 
banking,  and  sketches  of  monetary  history.  He  com- 
prehends the  immense  power  of  money  in  mobilizing 
industry  and  producing  wealth,   and  states  it  thus  : 

"The  quantity  of  industry,  therefore,  which  any  so- 
ciety can  employ  must  be  in  direct  ratio  to  the  amount 
of  its  money,  in  whatever  form.  *  *  *  Without 
it  (paper  money),  the  commerce  and  wealth  of  such 
countries  as  Great  Britain  and  the  United  States  could 
not  have  reached  one-fifth  of  their  present  prodigious 
proportions." 

Notwithstanding  Mr.  Poor  is  so  given  to  criticism, 
yet  he,  as  reckless  critics  usually  do,  subjects  himself 
to  severe  and  merited  criticism.  He  manifests  a 
reckless  disregard  of  consistency,  only  a  few  instances 
of  which  we  notice.  On  page  6  he  asserts  that  the 
value  of  the  precious  metals  is  absolute,  depending  upon 
one  condition,  cost  of  their  production  ;  while  on  page 
22  he  advances  the  truth  that  increased  demand 
for  them  would  cause  them  to  rise  in  price.  On  page 
589  he  states  that,  "All  such  balances  (meaning  for- 
eign balances  of  trade)  must,  in  the  long-run,  be  paid 
in  merchandise  by  countries  that  are  not  producers  of 
the  precious  metals  ;"  and  on  the  same  page  he  says, 
"When  the  work  of  redemption  is  fairly  entered  upon, 
this  country  will  for  some  time  be  a  large  importer  of 
coin  from  the  very  countries  to  which  it  is  now  most 
indebted."  The  countries  to  which  we  are  most  in- 
debted are  not  producers  of  the  precious  metals,  and 
would,  according  to  his  first  proposition,  settle  with 
merchandise,  but  according  to  his  other  proposition 
would  settle  with  coin.  He  proposes  a  United  States 
bank  with  branches  ;  the  parent  bank  to  be  the  reposi- 
tory of  the  revenues  and  the  fiscal   agent   of  the  gov- 


30  PREFATORY CHAPTER  FIRST. 

ernment.  He  advances  the  idea  that  all  the  payments 
to  be  made  by  the  government  could  be  done  through 
the  bank  by  "symbols" — i.  e.,  checks,  drafts,  etc., 
without  the  use  of  a  dollar  in  coin,  and  yet  he  violently 
opposes  a  legal  tender  money  ^vith  which  to  do  exactly 
the  same  thing.  He  denounces  a  legal  tender  money 
and  yet  advances  the  theory  that  all  the  issues  of  such 
a  bank,  used  by  the  government  in  its  fiscal  operations, 
could  be  kept  in  circulation  by  reason  of  its  being  so 
used  by  the  government.  Notwithstanding  his  oppo- 
sition to  legal  tender  paper,  he  would  have  the  issues 
of  a  United  States  bank  made  receivable  in  the  reve- 
nues of  government — which  would  constitute  them  a 
legal  tender  that  far.  He  supposes  that  the  trans- 
actions of  the  government  would  keep  about  $100, 000,- 
000  of  the  notes  of  such  a  bank  in  circulation  without 
any  coin  reserves  to  sustain  them.  The  fiscal  opera- 
tions of  the  government  are,  say,  $300,000,000  a 
year.  The  transactions  of  the  whole  country  are  about 
$100,000,000,000.  Now,  if  $300,000,000  of  transactions 
by  the  government  with  such  a  bank  paper  will  keep 
$100,000,000  of  it  in  circulation  without  any  reserves 
to  sustain  it,  is  it  remarkable  that  it  should  be  held  by 
some  that  $100,000,000,000  transactions  by  the  whole 
country  would  keep  $1,500,000  legal  tender  paper 
money  in  circulation  without  a  dollar  of  coin  to  sustain 
it? 

Mr.  Poor  has  gathered  up  a  fragment  of  the  legal 
tender  idea  and  incorporated  it  in  his  banking  system, 
in  apparent  ignorance  of  the  conclusion  to  which  it 
would  bring  him  if  he  pursued  the  idea  logically.  He 
has  permitted  his  mind  to  be  so  occupied  with  the  in- 
tricate transactions  of  banks  in  their  operations  with 


REVIEW  OF  AUTHORS.  31 

money,  as  to  prevent  him  from  obtaining  clear  and 
well  defined  conceptions  of  the  laws  which  should  con- 
trol ih-c  production  and  supply  of  money,  as  well  as  its 
laws  and  functions  as  a  distinct  element  of  poAver.  The 
laws  which  control  in  the  handling  and  distrihution  of 
money,  as  in  everything  else,  are  different  in  kind  and 
system  from  those  which  control  in  the  production  and 
sup)ply  of  money,  as  in  every  thing  else.  Mr.  Poor's 
failure  to  distinguish  between  these  very  distinct  arts 
and  sciences  has  resulted  in  producing  in  his  mind  a 
mixed  and  very  complicated  money  system,  constructed 
as  follows  : 

A  United  States  bank  which  shall  deposit  in  the 
Treasury  bonds  to  the  amount  of  $100,000,000,  bearing 
a  low  rate  of  interest,  as  a  safety  fund  for  depositors  ; 
the  funds  of  the  Treasury  shall  ])e  deposited  with  the 
bank  and  the  latter  shall  be  the  fiscal  agent  of  the  gov- 
ernment ;  it  is  to  issue  notes  which  shall  be  receivable 
for  the  revenues,  about  $100,000,000  of  which  he 
thinks  would  circulate  at  par  on  that  account  without 
any  reserves  to  redeem  them .  This  bank  is  to  have 
branches  in  all  cities  of  50,000  inhabitants,  and  these 
branches  are  to  issue  notes.  Then  there  are  to  be 
local  banks  of  issue  with  free  banking.  The  national 
bank  issues  are  to  be  retired  and  the  legal  tenders  all 
funded.  Thus,  Mr.  Poor  would  afflict  the  country  with 
the  treble  evil  of  a  United  States  bank  with  branches, 
local  banks  which  are  to  issue  notes  and  an  increase  of 
our  bonded  debt  $350,000,000  by  funding  the  out- 
standing legal  tenders.  This  is  very  much  like  the 
banking  system  of  England  and  would  inevitably  bring 
upon  this  country  periodic  panics  and  destructive  crises 
as  that  system  has  done  in  England. 


PREFATORY— CHAPTER  SECOND. 


CRITICISMS    ON   CURRENT   THEORIES. 

Before  proceeding  to  a  consideration  of  the  science 
and  history  of  monetary  affairs  in  regular  order, 
we  submit  the  following  criticisms  on  the  various 
theories  current : 

Ultra  Greenhackers — This  class  want  $2,000,000,- 
000  or  $3,000,000,000  of  absolute  paper  money,  full 
legal  tender,  issued  at  once,  directly  by  the  govern- 
ment, receivable  for  all  debts,  taxes,  and  dues,  public 
and  private.  They  want  the  bonded  debt  of  the  United 
States  all  paid  off  with  these,  regardless  of  the  legally 
bounden  condition  of  the  government  to  pay  some  of 
them  in  coin.  This  theory  is  subject  to  several  grave 
objections : 

First :  Such  an  enormous  and  sudden  inflation  of 
the  currency  would  greatly  depreciate  its  purchasing 
power,  and  so  quickly  unsettle  prices  and  change  the 
order  of  things  as  to  result  in  evil.  The  prices  of  all 
property  would  suddenly  bound  upward  one  or  two 
hundred  per  cent.  Such  a  rapid  emhancement  of  val- 
ues would  set  the  nation  wild  with  speculation.  Every 
man  that  could  command  a  little  money  or  property, 
amid  the  feverish  state  of  trade,  too  impatient  to  wait 


CRITICISMS  OX  CURRENT  THEORIES.  33 

for  the  slow  process  of  production,  would  swiftly  pro- 
ceed to  buvinir  and  selling.  Tliis,  in  addition  to  the 
sudden  increase  of  money,  would  send  prices  higher 
and  higher,  until  they  would  go  far  above  the  power  of 
even  that  enormous  volume  of  money  to  su.'^ain  them. 
It  would  add  fervid  excitement  to  the  mind  and  in- 
spire all  commercial  and  speculative  classes  with  im- 
petuosity and  rashness  overleaping  the  bounds  of 
prudence    and    setting    cool     judgment     at     defiance. 

A  limit  to  such  a  spasmodic  ascent  of  prices  would 
soon  be  reached.  Whenever  prices  should  reach  the 
maximum  and  cease  for  a  time  to  advance,  quick  sales 
and  profits  would  cease.  At  that  point  men  would  begin 
to  push  off  their  stock  in  trade,  then  a  process  of  de- 
cline in  prices  would  set  in.  At  that  point  all  the  fever- 
ish, fervid,  spasmodic  excitement  in  business  would 
give  wav  and  nothing  being  left  to  sustain  the  markets, 
but  the  legitimate  elements  of  money  and  credits,  prices 
■would  fall  as  rapidly  as  they  had  risen.  Thence 
would  inevitablv  follow  a  great  panic,  a  glut  of  markets, 
hoarding  of  money,  distrust,  refusal  of  capitalists 
to  lend  or  invest,  and  a  consequent  continued  shrink- 
age of  values  until  the  mercantile  and  debtor  classes 
were  ruined,  and  creditors  either  lost  or  collected  all. 
Thus  the  small  operator  would  be  ruined,  and  the 
mamuK^h  house  reduced  to  half  its  value  ;  all  business 
would  be  stagnant  ;  thousands  of  laborers  would  be 
quickly  turned  out  of  the  industrial  shops  into  the  streets 
to  seek  in  vain  for  employment.  The  nation  would 
be  thrown  into  a  state  of  agitation,  sudden  and  ex- 
treme. 

It  is  true  that  this  state  would  not  continue  long, 
because  the  monev  being  a  legal  tender,  would  not  de- 


34  PREFATORY CHAPTER  SECOND. 

predate ;  on  the  contrary,  its  value,  its  purchasing 
power  would  enhance  as  our  Greenbacks  did  in  1873 
and  since.  Business  would  gradually  revive  on  a 
more  solid  basis  than  at  first.  But  such  a  catastrophe 
need  not  occur.  It  ought  to  be  avoided,  because  it  is 
liable  to  result  in  riots,  strikes,  destruction  of  lives 
and  i^roperty,  would  arouse  discontent  and  dissatis- 
faction among  the  people,  and  might  seriously  disturb 
the  peace  of  the  countr}'. 

The  objection  is  not  so  much  to  the  quantity  of 
money  asked  by  the  ultra  greenbackers  as  to  the 
suddenness  of  the  issue.  Although  $2,000,000,000  is 
more  money  than  the  country  needs,  yet  so  much  as 
that,  if  issued  slowly  and  regularly,  might  be  put  in 
circulation  without  bringing  such  a  crisis  as  the  one 
referred  to.  Such  a  crisis  would  not  result  directly 
from  the  quantity  of  mone}'  issued.  But  the  sadden 
issue  of  so  much  mone}^  producing  a  sudden  and  very 
excited  state  of  trade,  would  elevate  prices  fur  above 
the  power  of  the  money  alone  to  sustain  them,  and 
when  that  sudden  and  excited  state  of  trade  should 
bejrin  to  laniTuish,  prices  thereby  loosino:  one  of  their 
supports,  would  tumble  down,  thence  a  crisis. 
Then,  of  course,  new  efforts  would  be  made  to  change 
the  system,  and  the  irrepressible  conflict  of  various 
theories  would  again  be  revived  to  agitate  the  country. 
An  avoidance  of  this  is  much  to  be  desired. 

Second  :  If  the  legal  tenders  called  for  by  this  class 
of  people  were  receivable  for  custom  dues,  it  would,  on 
that  account,  be  current  to  some  extent  with  all  com- 
mercial houses  in  other  nations  having  commercial  in- 
tercourse with  this  countr}'.  In  proportion  to  the 
foreign  circulation   of  our  money,   our  home   supply 


CRITICISMS  ON  CURRENT  THEORIES.  35 

would  be  reduced  and  the  volume  subjected  to  change, 
bringing  in  some  degree  the  evils  of  fluctuating 
markets . 

Third  :  The  government  must  have  coin  to  pay  in- 
terest on  its  bonds  so  long  as  any  of  the  coin  bonds 
remain  unpaid,  unless  its  contract  be  violated  by  the 
forced  payment  of  the  interest  in  legal  tender  paper, 
and  this  would  be  not  only  unjust,  but  unnecessary. 
If  legal  tenders  be  made  receivable  for  custom  dues, 
such  dues  would  be  all  paid  in  paper,  and  the  govern- 
ment's only  source,  except  the  sale  of  bonds,  for  getting 
coin  would  be  cut  oif .  This  would  necessitate  an  in- 
crease of  bonded  indebtedness  to  raise  coin  to  pay  in- 
terest on  outstanding  bonds. 

The  government  always  needs  coin  in  war,  and  a 
stock  of  coin  ought  to  be  raised  in  time  of  peace,  by 
coin  custom  duties  for  war  purposes. 

Besides  these  objections,  another  arises  with  refer- 
ence to  the  government's  obligation  to  pay  certain 
bonds  in  coin.  Wherever  the  government  is  legally 
bound  to  pay  bonds  in  coin,  they  ought  to  be  so  paid, 
or  settled  in  a  manner  satisfactory  to  the  holder. 
There  will  be  neither  occasion  nor  excuse  for  repudiat- 
ing the  slightest  legal  obligation  of  the  government,  if 
our  financial  measures  put  it  within  the  jjower  of  the 
people  to  discharge  them.  But  there  are  government 
bonds  outstanding,  which  the  crovernment  is  neither 
legally  nor  morally  bound  to  pay  in  coin.  I  refer  to 
those  issued  under  the  act  of  Congress  of  18G2,  and 
subsequent  acts  which  provide  that  the  bonds  shall  be 
paid  in  lawful  money.  Lawful  money  meant  "Green- 
backs" when  those  bonds  were  issued,  and  means  them 
yet.     The   Congress  of  1869,  betraying  their    sacred 


36  PREFATORY CHAPTER  SECOND. 

trust,  disreorardinor  the  risrhts  and  wrongs  of  their  con- 
stituents,  and  executing  the  mandates  of  the  money  pow- 
er, made  themselves  infamous  by  passing  an  act  pro- 
viding that  the  bonds  which  had  been  issued  by  govern- 
ment prior  to  that  time  should  be  paid  in  coin.  At 
the  time  that  act  was  passed,  every  bond  it  had  refer- 
ence to  had  passed  out  of  the  government's  hands ; 
had  been  bought  and  the  terms  of  the  purchase  and 
payment  of  them  by  the  government  had  been  fixed  by 
the  acts  authorizing  their  issuance.  They  were  pay- 
able in  lawful  money,  legal  tender,  paper,  gold  or 
silver. 

The  act  of  1869,  was  therefore  an  expost  facto 
law,  and  void  by  the  terms  of  the  Constitution  of  the 
United  States,  and  ought  not  to  be  obeyed  or  observed 
by  the  administration.  But  the  money  power  have 
easily  succeeded  in  procuring  the  passage  of  two  other 
acts  of  Congress,  which  will  secure  the  payment  of 
those  bonds  in  the  dearest  money,  gold,  if  they  are  not 
repealed.  Those  are,  the  acts  for  the  resumption  of 
specie  payment,  and  for  the  demonetization  of  silver. 
The  former  will  destroy  all  the  Greenbacks ;  and 
the  latter,  the  legal  tender  character  of  silver,  so 
that  if  they  remain  in  force,  the  bond-holders  will  be 
paid  gold  for  their  bonds  in  spite  of  the  illegality  of 
the  infamous  act  of  1869. 

What  Congresses  we  have  had  !  What  perfect  rep- 
resentatives of  a  patient  and  long-suffering  people? 
Every  man  who  had  a  hand  in  that  system  of  legisla- 
tion ought  to  be  branded  as  a  traitor  and  cast  out  as  a 
reproach  and  a  byword.  But,  notwithstanding  these 
infamies,  every  lawful  o])ligation  of  the  government 
ought  to  be  met  and  will  be  cheerfully  discharged  by 


CRITICISMS  ON  CURRENT  THEORIES.  37 

the  people,  if  the  government  will  only  put  itself  from 
under  the  influence  of  the  money  power  and  so  legis- 
late and  administer  public  affairs  as  to  make  it  possible 
for  them  to  do  so. 

Tlie  United  States  as  a  money  broker. — Some  urge 
the  virtue  of  the  government's  issuing  more  "Green- 
backs ' '  and  lendino;  them  to  individuals  on  mortorao;es 
at  low  rates  of  interest.  This  system  is  subject  to  sev- 
eral objections.  1st,  Unless  the  amount  thus  to  be 
loaned  was  limited,  every  man  would  be  a  borrower 
and  the  country  would  suddenly  be  flooded  with  thous- 
ands of  millions  of  paper  to  set  the  country  Avild  with 
excitement,  induce  an  unhealthy  and  unsustamable  ad- 
vance of  prices  and  result  in  a  crisis.  New  avenues 
for  fraud  would  be  opened  up  by  this  system  and  the 
government  would  be  swindled  enormously  by  combi- 
nations of  sharpers  and  government  loan  agents.  2nd, 
If  the  amount  were  limited,  a  few  rich  men  in  each 
State  would  get  all  the  money  and  re-loan  at  higher 
rates  of  interest,  and  thus  the  system  would  become  a 
measure  to  fleece  the  people.  3rd,  Such  a  system 
would  necessitate  a  new  set  of  fiscal  agents  to  eat  up 
the  public  revenues,  swindle  the  government,  and 
practice  administration  favoritism.  4th,  Such  a  sys- 
tem w^ould  be  subject  to  great  and  sudden  fluctua- 
tions in  the  volume  of  money,  resulting  from  the  in- 
crease and  decrease  of  loans  and  payments  at  different 
periods,  thus  afflicting  the  country  with  the  curse  of 
fluctuating  markets.  5th,  If  the  debt,  when  con- 
tracted wdth  the  government,  were  to  remain,  m  other 
words,  if  the  loans  were  to  be  perpetual,  then  every 
mortgage  to  secure  such  loan  would  be  a  perpetual  en- 
cumbrance on  the  laud  mortgaged,  converting  the  peo- 


uu^i2, 


38  PREFATORY CHAPTER  SECOND. 

pie  from  independent  freeholders  into  dependent  mort- 
ofaorors  of  the  oroverument — a  danixerous  attitude  for 
people  who  want  a  perpetuation  of  free  institutions. 

Interconvertible  Bonds. — Another  class  advocate  the 
issuance  of  government  bonds  bearing  a  low  rate  of 
interest,  interconvertible  by  the  holder  into  legal  tender 
notes  at  will  and  vice  versa .  They  claim  that  this  sys- 
tem would  expand  and  contract  the  currency  in  pro- 
portion to  the  needs  of  the  country.  This  idea  is  one 
of  the  most  pernicious  that  belongs  to  the  old  coin 
banking  system.  It  is  a  fallacy.  All  past  financial 
history  shows  that  in  all  times  of  stringency,  those 
who  have  money  capital  universally  seek  out  safe  se- 
curities, no  matter  how  low  the  rate  of  interest,  and 
invest  in  them  rather  than  lend  money  at  a  higher  rate 
of  interest,  or  invest  in  productive  industry  or  com- 
merce. On  the  other  hand,  when  money  is  abundant, 
every  branch  of  business  is  brisk,  money  is  in  good 
demand  and  lends  for  a  higher  rate  of  interest,  and 
those  possessing  money  capital  exchange  their  3 
and  4  per  cent,  bonds  for  cash  and  lend  it  freely  at  10 
to  15  per  cent,  interest.  Such  would  be  exactly  the 
case  with  the  interconvertible  bond  system.  Whenever 
any  depressing  accident  occurred,  such  as  war,  bad 
crops,  adverse  foreign  balances,  etc.,  and  money 
ceased  to  circulate  freely,  safe  borrowers  became  few 
and  interest  on  gilt-edged  paper  fell  low,  as  it  always 
does  in  such  times,  those  having  money  would  sink  it 
in  the  U.  S.  Treasury  and  take  three  per  cent,  bonds 
for  it  in  preference  to  lending  to  borrowers,  and  thus 
the  system  would  result  in  further  contracting  the  cur- 
rency when  an  expansion  should  be  had.  Again,  on 
the  other  hand,  when  money  appeared  abundant  by 


CRITICISMS  ON  CURRENT  THEORIES.  39 

Teasoii  of  its  free  circulation,  business  brisk,  profits 
large,  and  interest  on  commercial  loans  high,  those 
having  interconvertible  bonds  bearing  low  interest 
would  take  them  to  the  U.  S.  Treasury,  get  legal  ten- 
ders for  them,  lend  the  money  out  at  10  or  15  per 
cent,  interest,  and  thus  further  inflate  the  currency 
when  the  country  did  not  need  it. 

The  system  would  be  a  vicious  one,  operating  on  the 
currency  exactly  like  the  system  of  banking  on  coin 
does,  alternately  expanding  and  contracting  the  cur- 
rency in  reverse  proportion  to  the  needs  of  the  coun- 
try. The  currency  ought  not  to  be  alternately  expanded 
and  contracted.  Two  things  are  absolutely  essential 
to  continuing  prosperity.  They  are,  1st,  A  sufficient; 
and,  2nd,  A  steady  volume  of  money.  Any  system 
which  conflicts  with  these  Avill  produce  evil. 

Interest. — Many  writers  and  talkers,  have  much  to 
say  about  the  rate  of  interest.  They  say  it  is  too  high 
and  that  this  or  that  system  would  reduce  it.  It  is 
very  evident  that  any  one  holding  such  ideas  have 
not  given  that  thought  to  the  laws  of  interest  that  they 
should  have  done.  The  rate  of  money  interest  in  the 
commercial  and  financial  world  is  always  determined 
by  the  value,  i.  e.,  the  purchasing  power  of  money  in 
reverse  proportion.  The  o\\\y  general  exception  to  this 
is  in  the  case  of  risky  loans. 

This  law  of  interest  is  not  controlled  by  any  arbitrary 
power.  It  is  as  much  beyond  the  reach  of  legislative  en- 
actment as  the  relative  values  of  property  are.  It  arises 
from  conditions — from  the  state  of  the  business  affairs, 
both  financial  and  commercial,  of  the  nation.  "When 
money  is  scarce  a  dollar  is  worth  more  than  Avhen  it  is 
plentiful,  but  it  will  not  lend  for  more,  because  the  in- 


40  PREFATORY CHAPTER  SECOND. 

terest  is  payable  in  money,  and  being  so  paid,  a  smaller 
rate  of  interest  will  brinsi:  the  lender  more  wealth  in 
"hard  times"  than  a  higher  rate  of  interest  will  in 
"flush"  times.  -  Furthermore,  in  times  of  stringency 
in  money  matters,  safe  borrowers  become  scarce  and 
capitalists  refuse  to  invest  and  mone}^  lenders  become 
cautious,  doling  out  loans  very  sparingly.  The  result 
is,  that  the  banks  and  large  capitalists  have  a  surplus 
of  money  by  reason  of  hoarding,  and  as  "gilt-edged" 
borrowers  are  scarce — and  they  are  the  only  ones  that 
capitalists  like  to  lend  to  in  stringent  times — money 
"o;oes  a  beo-oincr"  at  verv  low  interest.  On  the  other 
hand,  in  easy,  prosperous  times,  when  every  man  finds 
profit  in  industry  and  enterprise,  capitalists  invest  in 
business  and  money  loaners  lend  freely  with  assurance 
of  payment ;  they  hoard  but  little,  money  circulates 
freely,  prices  of  property  rise,  the  purchasing  power 
of  money  is  low,  and  three  things  raise  the  rate  of  in- 
terest :  1st,  Money  being  cheap,  the  rate  of  interest 
must  be  his^h  to  bring  the  lender  a  revenue,  because 
the  interest,  being  paid  in  money,  is  relatively  de- 
preciated although  the  rate  is  higher.  2ud,  Business 
being  brisk  and  profits  good,  the  borrower  can  afford  to 
pay  a  higher  interest  than  in  dull  times.  3rd,  The  in- 
vestments of  money  by  capitalists  and  the  free  lending 
by  money  loaners  puts  nearly  all  the  money  in  actual 
circulation  and  brings  the  quantity  of  loanable  funds 
low.  Hence,  the  increased  use  of  money  and  the  re- 
duction of  the  surplus  of  it,  together  with  the  ability  of 
borrowers  to  pay  high  rates,  advance  the  rates  of  in- 
terest. 

Nothing  hut  Legal  Tenders. — Others  want  both  gold 
and  silver  demonetized  so  that  we  shall  have '  only  le- 


CRITICISMS  ON  CURRENT  THEORIES.  41 

gal  tender  paper  money.  This  scarcely  needs  an  ans- 
wer. The  public  indebtedness  of  the  country  bears 
coin  interest,  some  of  the  bonds  are  payable  in  coia 
and  foreign  balances  must  be  settled  in  coin.  It  is  not 
only  to  our  interest,  but  it  is  the  legal  right  of  the  gov- 
ernment to  make  and  regulate  the  value  of  gold  and 
silver  coin  in- which  these  obligations  are  to  be  paid. 
Otherwise,  we  would  be  subject  to  the  annoying  per- 
plexity of  satisfactorily  settling  the  question  of  how 
many  grains  of  gold  and  silver  constiiute  a  dollar. 
Furthermore,  there  is  a  profit  in  minting,  and  the  gov- 
ernment oujxht  to  have  it. 

One  of  the  most  important  reasons  why  gold  and 
silver  should  be  monetized  is,  that  they  would  then  be 
minted,  and  as  they  constitute  what  is  called  the  world's 
money,  that  is,  are  current  ever^^where,  the  quantity 
minted  by  the  United  States  would  add  just  so  much 
to  the  world's  stock  of  money  and  tend  in  some  degi-ee 
to  sustain  prices,  stimulate  production  and  business, 
and  advance  civilization.  We  should  have  metal  money 
for  our  financial  intercourse  with  foreiijn  nations  and  a 
legal  tender  paper  money  for  domestic  use. 

The  Golden  Calf. — Others  oppose  the  remonetiza- 
tion  of  silver  because,  they  say,  if  remonetized  it  will 
be  of  less  value  than  gold,  will  injure  pul)lic  credit  and 
be  inconvenient  on  account  of  its  bulk  and  weight.  It 
may  or  may  not  be  of  less  value  than  gold.  Its  re- 
monetization  in  the  United  States  will  quickly  appre- 
ciate its  value.  It  will  be  on  par  with  paper  and  per- 
haps with  gold  also.  Its  increased  uses  by  remoneti- 
zation  must  enhance  its  value.  The  idea  that  it  will 
injure  our  foreign  commerce  has  no  foundation  in  fact 
or  in  true  principles  of  economic  science.     The  object 


42  PREFATORY CHAPTER  SECOND. 

of  commerce  is  trafic,  the  exchange  of  one  commodity 
for  another.  The  least  of  all  objects  which  forms  a 
motive  for  foreign  trade  is  to  get  money  from  abroad. 
England  wants  our  cotton  to  employ  her  laborers  and 
produce  fabrics  which  yield  a  profit,  more  than  she 
wants  our  gold.  Our  own  exporters  do  not  exjiect 
to  get  the  money  of  England,  France  or  Belgium 
for  their  exported  goods.  They  know  their  balances 
will  be  settled  by  bills  of  exchange  on  New  York,  Bos- 
ton, Philadelphia  or  Baltimore  ultimately.  Generally 
they  do  not  expect  the  shipment  of  a  dollar  of  coin  to 
them  from  abroad.  Eno-land,  with  her  leo^al  tender 
bank  paper  grew  rich  from  foreign  commerce  during 
her  twenty-one  years'  war  with  Bonaparte.  Italy  and 
France  have  prospered  greatly  under  their  legal  tender 
paper  S3'stems  and  experienced  no  inconvenience  or  det- 
riment to  commerce  on  its  account.  Our  foreiccn  com- 
merce  has  doul)led  durinsi;  the  era  of  legal  tenders,  A 
depreciated  currenc}^  either  paper  or  coin,  does  not  in- 
juriously affect  our  foreign  commerce. 

They  say  the  remonetization  of  silver  would  depre- 
ciate the  national  bonds.  It  is  not  certain  that  it 
would,  because  with  silver  remonetized,  the  world's  le- 
gal tender  money  would  be  increased,  and  the  increase 
of  such  legal  tender  money  would  tend,  at  least  slightly, 
to  increase  values,  or  retard  their  further  decline,  se- 
curities included.  Remonetization  would  not  be  a 
breach  of  public  faith.  A  breach  of  faith  is  a  violation 
of  some  duty  or  pledge.  The  government  can 
make  no  pledges  except  such  as  are  legally  binding. 
The  government  is  not  legally  bound  to  keep  silver  de- 
monetized, hence,  to  remonetize  it  would  not  break  a 
pledge.     Whatever  depreciation  the  bonds  might  suffer 


CRITICISMS  ON  CURRENT  THEORIES.  43 

in  consequence  of  the  remonetization  of  silver  would 
make  them  the  more  easily  paid  ;  and  as  the  great 
bulk  of  them  were,  before  the  infamous  act  of  18G9, 
payable  in  legal  tenders,  and  up  to  1873  in  silver,  it 
would  be  no  act  of  bad  faith  or  injustice  to  bond  hold- 
ers to  enforce  the  jDayment  of  them  in  silver.  If  such 
a  course  should  depreciate  the  public  credit,  let  it  de- 
preciate. It  would  be  a  blessing  to  this  country  if  it 
never  should  sell  another  interest-bearing  bond  to  waste 
industry  and  make  slaves  of  the  toiling  masses.  To 
force  a  payment  of  the  vast  bonded  indel)tedness  of  this 
country  in  gold  is  a  thing  impossible,  and  the  effort  to 
do  it  will,  soon  or  late,  so  oppress  the  people  as  to  in- 
duce repudiation  and,  perhaps,  revolution.  It  would 
be  far  better,  not  only  for  the  people,  but  the  bond- 
holders also,  to  pay  those  bonds  in  legal  tenders  than 
to  goad  the  masses  to  repudiation. 

The  objections  urged  by  bullionists  against  the  re- 
monetization of  silver  are  only  ostensible.  Their  real 
objections  are  that  such  an  act  would  tend  to  make 
money  more  plentiful,  and  thus  reduce  its  value  and 
reduce  its  purchasing  power  and  their  profits.  These 
were  the  bald-faced  reasons  assigned  in  Germany  in  ar- 
guments for  the  demonetization  of  gold  in  1857.  Here 
and  there  among  the  masses  are  found  dupes  of  the 
money  power  who  oppose  the  remonetization  of  silver. 
They  ignorantly  advocate  their  own  destruction.  They 
fail  to  consider  the  fact  that  the  internal  commerce  of 
this  nation  is  the  immense  thing  that  gives  employment 
to  labor  and  profit  to  business,  and  rises  in  gigantic 
proportions  and  importance  above  foreign  commerce. 
Our  internal  commerce  is  a  hundred  times  greater  than 
our  foreign  trade.     These  figures  illustrate  the  para- 


44  PREFATORY CHAPTER  SECOND. 

mount  importance  of  the  government's  issuing  such 
kinds,  denominations,  and  sums  of  money  as  will  enable 
it  to  penetrate  every  nook  and  corner  of  the  republic  in 
sufficient  quantities  to  facilitate  ex(^hanges,  stimulate 
the  movements  of  the  vast  production  of  the  country, 
energize  every  hand,  and  keep  every  man  engaged  at 
such  wages  as  will  secure  comfort  and  prevent  pauper- 
ism and  crime. 

National  Banks. — The  bullionists,  national  bankers 
and  tlioir  friends  want  the  national  banking  system 
perpetuated.  But  there  are  many  very  grave  object- 
ions to  this  system. 

First:  It  is  needlessly  expensive.  Its  bonds,  upon 
which  its  notes  are  issued,  are  safely  deposited  in  the 
U.  S.  Treasury.  The  bankers  draw  coin  interest  on 
these  bonds  from  the  government  and  pay  no  taxes 
upon  them.  The  government  allows  them  to  issue 
about  90  per  cent,  of  the  amount  of  their  bonds  in 
notes,  thus  gratuitously  without  any  cost  to  the  banks, 
except  the  tax  on  their  issues,  increasing  their  interest- 
bearing  capital  90  per  cent.  In  other  words,  upon  a 
capital  of  $100,000,000  they  can  reap  profits  from 
$190,000,000,  They  lend  at  from  8  to  12  per  cent, 
interest.  The  people  pay  them  on  their  bonds  from 
five  to  six  per  cent,  interest.  Thus  the  people  pay 
from  13  to  18  per  cent,  interest  to  the  national  banks 
on  every  dollar  of  "Blackbacks"  in  circulation.  Be- 
sides this,  the  government  coins  and  issues  to  the  banks 
their  notes  free  of  charge.  The  government  must  also 
settle  up  the  busin(;ss  of  every  broken  bank.  This  is  a 
useless  and  extravagant  system,  calculated  to  concen- 
trate wealth  and  rapidly  enrich  the  money  power  of  the 


CRITICISMS  ON  CURRENT  THEORIES.  45 

country  at  the  expense  and  by  the  oppression  of  the 
people. 

Second :  The  effects  of  this  system  on  the  volume 
of  the  currency,  and  the  lial)ility  of  the  banks  to  fail 
are  in  no  essential  point  different  from  the  old  State 
Bank  System,  or  ain'-  sj'stem  of  bank  issues  based  on 
coin.  AVhen  all  the  legal  tenders  shall  have  been  re- 
deemed and  every  dollar  of  bank  notes  shall  be  re- 
deemable in  coin,  as  they  will  be,  and  crises  come,  as 
they  must,  then  runs  will  be  made  on  these  banks  for 
coin,  they  will  not  be  able  to  redeem,  they  will  fail, 
their  notes  will  be  presented  at  the  U.  S.  Treasury 
for  redemption,  and  it,  for  want  of  coin,  also,  will  fail 
to  redeem  them.  Then  the  debtor  will  be  at  the 
mercy  of  his  creditor  and,  with  his  pockets  full  of 
national  bank  notes,  may  be  sacrificed  because  they 
will  not  be  legal  tender  money.  It  is  a  kin  to  that  of 
England,  and,  if  perpetuated,  will  afflict  this  country 
with  periodic  crises  just  as  it  has  afflicted  England. 
There  will  be  periods  of  inflation  when  coin  reserves 
are  favorable,  followed  by  sudden  contractions,  pro- 
duced by  drains  of  coin  from  the  countrj'^,  causing  pan- 
ics, destruction  of  credit,  fall  of  prices,  bankruptcies, 
pauperism,  and  crime.  It  will  be  the  same  old  story 
over  and  over  again.  The  mutations  of  the  currency 
will  curse  this  country  with  "panics"  and  "crashes" 
so  long  as  we  have  a  redeemable  pajDer  issued  by  banks. 

The  theories  of  bullionists  are  drawn  from  the  bank- 
ing svstems  which  have  cursed  Enirland  and  this  coun- 
try  for  nearly  a  century. 

The  substance  of  all  their  theories  is  that,  the  paper 
money  nmst  be  based  on  and  redeemable  in  coin.  The 
corollary  to  this  is  that  the  paper  money  nmst  always 


46  PREFATORY CHAPTER  SECOND. 

be  kept  so  small  in  volume,  that  the  coin  in  banks  and 
that  easily  obtainable,  will  cover  the  paper  presented  for 
redemption.  The  small  quantity  of  coin  in  the  country 
and  obtainable  forces  them  to  decry  inflation  as  the 
cause  of  all  our  woes  and  advocate  contraction  of  the 
currency  as  the  only  means  of  returning  to  solid  pros- 
perit}^ — by  solid  prosperity  they  mean  a  system  of  re- 
deemable bank  paper,  whereby  the  banks  promise  to 
redeem  from  three  to  ten  dollars  in  paper  with  one  in 
coin.  Such  a  currency  system  does  very  well  in  times 
of  general  prosperity,  when  business  is  brisk  and  every 
man  has  confidence  in  the  intention  and  ability  of  his 
neighbor  to  meet  his  obligations  ;  but  when  the  coun- 
try falls  into  hard  times,  when  business  is  stagnant, 
confidence  gone  and  suspicion  takes  its  place — when  the 
country  is  financially  sick,  such  systems  are  like  the 
quack  doctor  in  a  case  where  the  patient's  life  trembles 
in  the  balance,  they  are  powerless  to  save. 

The  history  of  all  such  systems  shows  that  whenever 
reserves  were  favorable  or  promised  favorably,  it  has 
been  the  habit  of  banks  to  issue  paper  largely,  often 
more  than  they  were  able  to  sustain  when  the  tide  of 
coin  reversed  its  course  and  flowed  out  of  the  country. 
Hence  the  number  of  blighting,  withering  crises  which 
have  marked  the  history  of  banking  on  coin.  The  ten 
terrible  crises  in  England,  and  seven  in  the  United 
States  in  the  last  sixty  years  under  such  banking  prin- 
ciples, ought  to  be  enough  to  arouse  the  dullest  brain 
to  a  sense  of  the  viciousness  of  the  system. 

It  defies  the  inventive  genius  of  man  to  find  out 
a  finance  system  more  variable  in  its  effects,  more 
fraught  with  good  at  times,  and  more  pernicious  to 
society    and    more    destructive     of     the     peace     of 


CRITICISMS  ON  CURRENT  THEORIES.  47 

nations  at  other  times,  than  that  of  bank  issues 
based  on  coin.  During  half  of  the  hist  sixty 
years  both  Enghmd  and  the  United  States  have 
oToaned  and  writhed  under  excniciatinii  tortures  caused 
by  this  vicious  banking  system  and  kindred  principles. 

Now,  after  we  have  had  not  only  line  upon  line, 
precept  upon  precept,  warning  upon  warning  against 
that  system,  but  thirty  years  terrible  suffering  from  it 
out  of  the  last  sixty,  the  bullionists  and  contractionists, 
the  money  power  want  to  place  the  country  again  at 
its  devouring  mercy. 

Resumption  of  specie  payments  and  the  national 
banking  system,  are  the  poAvers  by  which  they  propose 
to  force  the  country  into  its  old  financial  ruts,  regard- 
less  of  the  unutterable  woe  the  system  has  entailed,  is 
entailing  and  will  continue  to  entail  upon  the  people  of 
this  country. 

Patches. — Others,  even  Congressmen,  suggest  coin 
certificates,  postal  banks,  savings  banks,  compromises, 
patches,  bolstering,  etc.,  etc.  Postal  and  savings 
banks  are  good  agencies  for  operating  with  money. 
Coin  certificates  are  but  a  makeshift .  The  thing  needed 
by  the  country  is  a  well  defined,  complete  and  perfect 
money  system  established  upon  sound  economic  \iYm- 
c\p\es  for  the  creatioji  a7ul  pi-esei'vatioji  of  a  sufficient 
quantity  of  currency  to  meet  the  needs  of  the  people 
and  develop  the  wealth  of  the  nation.  From  the  be- 
ofinnins:  of  our  national  existence,  the  financial  policies 
of  the  government  have  been  ill-considered  exi^ediencies. 
This  has  resulted  in  constant  changes  and  produced 
great  suffering.  One  kind  of  paper  of  various  denom- 
inations, a  full  legal  tender,  in  sufficient  volume  to 
meet  the  commercial  needs  of  the  country,  is  immeas- 


48  PREFATORY CHAPTER  SECOND. 

urably  better  than  the  variety  we  now  have.     It  is  the 
one  thing  needful  ni  finances. 

The  Commune. — The  theory  of  this  class  is  that 
there  shall  be  no  money  ;  all  property  shall  be  common 
property  ;  every  man  shall  have  a  share  of  the  products 
equivalent  to  his  labors,  and  that  the  government  shall 
be  the  grand  agency  by  which  all  the  affairs  of  the 
nation  shall  be  controlled  and  through  which  all  prop- 
erty shall  be  distributed.  The  most  perfect  exemplifi- 
cation of  this  system  imaginable  was  the  constitution 
of  Peruvian  society  at  the  time  the  Spaniards  invaded 
and  subdued  Peru.  Peruvian  society  consisted  of  four 
castes  or  divisions :  the  government,  the  ecclesiastics, 
the  army  and  the  common  people.  The  government 
consisted  of  an  hereditary  king,  his  court  and  officers  ; 
the  ecclesiastics  of  the  priests  and  their  attaches  ;  the 
army,  of  the  officers  and  soldiery  ;  and  the  common  peo- 
ple, of  all  others.  The  latter  were  di\'ided  into  artisans, 
tillers  of  the  soil,  fishers,  road-workers  and  bearers  of 
burdens.  They  had  no  letters  and  kept  their  history 
by  knots  tied  in  cords.  They  had  no  money,  but  had 
immense  quantities  of  gold  with  which  they  ornamented 
their  temples.  They  worshipped  the  sun,  went  half 
naked,  and  the  government  distributed  the  products, 
taking  a  part  for  itself,  a  part  for  the  priesthood,  a 
part  for  the  army,  and  giving  the  rest  to  the  people. 
The  tillers  of  the  soil  did  not  o^\ti  the  land,  but  they, 
as  all  the  people,  were  changed  about  over  the  king- 
dom from  year  to  year  as  the  government  thought 
best.  There  was  communism  in  the  full,  ripe  fruit. 
Such  a  system  is  totally  incompatible  with  civilized  so- 
ciety, and  an  effort  to  establish  it  here  would  be  such  a 


CKITICISMS  ON  CURRENT  THEORIES.  49 

violent  attack  upon  the  civilization  of  the  age  as  to  pro- 
duce such  results  as  similar  efforts  have  done  in  the 
French  revolutions  of  the  last  and  this  century — 
drench  the  country  in  blood. 


MONEY  IS  POWER, 


CHAPTER  I. 


MONEY  :     ITS    PO"VVERS    AND    FUNCTIONS. 

_Firsf. — Money  is  a  measure  of  values.  In  this  sense 
it  is  a  thing  of  nominal!}'  fixed  value,  and  simply  ex- 
presses the  relative  money  value  of  other  things  with 
reference  to  themselves  and  to  itself.  As,  for  instance, 
a  cow  is  worth,  what?  Money — thirty  dollars  ;  a  horse 
is  worth  a  hundred  dollars.  Here  the  relative  values  of 
the  horse  and  cow,  with  reference  to  each  other  and  to 
money,  are  expressed  in  dollars — that  is,  money.  In 
other  words,  their  values  are  measured. 

This  use  of  money  is  purely  idealistic.  By  this 
mental  measuring  the  total  property  of  the  United 
States  was  estimated  by  the  assessors  to  be  worth 
$14,178,986,732  in  1870.  In  that  year  the  total  sum 
of  money  in  the  United  States  did  not  reach  one- 
seventeenth  part  of  the  assessed  valuation  of  the  prop- 
erty. It  is,  therefore,  clear  that  the  money  did  not 
represent  the  property,  nor  the  property  the  money. 
The  assessment  simply  represented  the  sum  of  the 
estimated  relative  values. 

Measuring  values  with  or  by  money,  is  literally 
and  exclusively  a  mental  process,  as  is  evidenced  by 
every  commercial  transaction,  from  the  sale  of  a  wheel- 


52  MONEY : 

barrow  up  to  the  purchase  of  a  railroad.  The  wheel- 
barrow is  rated  at  $10,  and  the  raih^oad  at  $2,000,000. 
How  and  why  so  rated?  By  comparing  them  with 
other  similar  property,  and  considering  their  uses  and 
the  profits  they  may  yield,  because  these  determine 
their  values.  All  property  is  so  rated,  its  value  so 
measured,  in  the  a1)stract,  without  the  actual  use  of  r 
dollar  in  money. 

So  far  as  this  use  of  money  affects  the  commer- 
cial affairs  of  the  world,  it  matters  not  what  the  meas- 
ure may  be,  so  that  its  smallest  unit  is  sufficiently 
small  to  measure  the  smallest  value.  Pounds,  shil- 
lings, pence  and  farthings  ;  dollars,  cents  and  mills,  or 
any  other  name  or  kind,  would  serve  the  purpose  of 
a  measure  equally  well. 

If  this  were  the  only  use  of  money,  one  mill  would 
be  enough  for  a  whole  nation.  This  is  clearly  demon- 
strated by  the  method  of  measuring  values  adopted  by 
a  tribe  of  heathens  on  the  coast  of  Africa,  who  did  it 
by  an  abstract  idea  named  macule.  By  this  idea  they 
rated  one  article  at  one  macule,  another  at  two,  and  so 
on.  This  was  simply  a  method  of  comparing  values 
by  the  measurement  of  an  abstract  idea.  The  same 
process  is  constantly  exhibited  in  the  United  States  in 
barter.  A  man  "swaps"  three  cows  valued  at  $90 
for  a  horse  valued  at  an  equal  sum.  No  money  passes. 
These  estimates  or  values  are  purely  idealistic. 

The  only  power  this  property  of  money  posses- 
ses is  that  of  creating  and  preserving  a  uniform  method 
of  estimating  and  expressing  values.  This  property  of 
money  is  convenient  and  useful,  but  it  is  the  most  in- 
significant power  it  exercises,  as  will  be  presently  seen. 

But  when  money  enters  into  and  is  actually  used 


ITS    POWERS    AND    FUNCTIONS.  53 

in  the  business  affairs  of  life  it  is  all-important  that 
there  should  be  enough  of  it  to  supply  eveiy  man 
"with  all  the  measures  necessary  to  do  all  the  measuring 
his  brains,  muscles  and  wealth  make  him  capable  of 
doino;.  Otherwise,  the  nation  would  be  as  a  dry  2:oods 
store  with  twenty  clerks  and  but  one  yard-measure. 
Immense  loss  of  time,  talents  and  powers  would  result 
from  an  insufficient  supply  of  measures. 

The  failure  of  statesmen  to  properly  estimate  the 
other  and  grander  powers  of  money,  and  their  habit  of 
dignifj'ing  its  measuring  propert}'  and  considering  it 
the  most  important,  have  caused  the  world  untold 
aijonies. 

Lookins;  on  money  as  a  measure  of  values,  thev 
have  legislated  for  a  "uniform  measure,  "  "  a  standard 
of  values,"  in  apparent  ignorance  of  the  destructive 
forces  they  have  set  in  motion  by  disregarding  the 
other  and  greater  powers  of  money. 

Second. — Money  is  a  medium  of  commercial  ex- 
change. In  this  sense  it  is  a  tiling^  not  an  idea,  which 
enables  men  to  exchange^  combine  and  apply  their  men- 
tal and  physical  powers,  to  carry  on  commerce,  transact 
business  and  pay  debts. 

It  enables  the  laborer  to  exchange  his  labor  for 
money,  and  the  money  for  the  necessaries  of  life. 
Thus  houses  are  built ;  railroads,  ships  and  steamers 
are  constructed  ;  streets  paved,  roads  made  practicable, 
shafts  sunk,  mines  opened,  factories  and  workshops 
operated ;  all  the  industries  are  pursued  and  the  ma- 
terial wealth  of  the  country  is  developed. 

It  enables  the  tillers  of  soil  to  exchange  their  products 
for  the   necessaries   of  life    and   implements  of  hus- 


54  MONEY : 

bandrv.    Thus  the  agricultural  wealth  of  the  country  is 
developed. 

It  enables  merchants,  shopkeepers,  owners  of  boats, 
ships,  and  railroads  to  supply  themselves  with  stock  and 
the  necessaries  of  life.  Thus  the  ag-encies  of  exchansr- 
ing  are  multiplied,  and  the  commercial  wealth  of  the 
country  is  developed  and  distributed. 

It  enables  the  scientist,  the  philosopher,  the  theolo- 
gian, the  lawyer,  the  doctor,  the  editor,  the  teacher,  all 
professional  men,  the  painter,  the  sculptor,  the  archi- 
tect, the  draftsman,  all  artists  to  exchange  their  knowl- 
edge and  skill  for  money  and  the  money  for  the 
necessaries  of  life  ;  and  thus  the  mental  and  artistic 
wealth  of  the  nation  is  developed. 

Money,  like  every  other  thing,  is  easy  to  command 
and  possess  when  plentiful  and  hard  to  get  when  scarce. 
"When  plentiful,  it  is  within  the  reach  of  the  many; 
when  scarce,  within  the  reach  of  only  the  few.  Hence 
the  importance  of  a  nation's  supplying  its  people  with 
a  large  volume  of  money,  in  order  to  enable  all  people 
to  use  it  in  applying  and  exchanging  their  j^owers  and 
products. 

This  proi:)erty  of  money  is  one  of  the  most  important. 

"Without  an  exchange  medium,  the  tiller  of  the  soil 
would  be  reduced  to  the  use  of  the  rudest  implements 
of  husbandry,  because  factories  and  shopkeepers  would 
not  exist.  His  food  would  consist  of  his  scanty  pro- 
ducts and,  his  clothing  of  the  skins  of  his  flocks  and 
herds  or  primitive  homespun. 

The  laborer  would  find  no  employment  except  with 
the  tiller  of  the  soil  or  the  owner  of  cattle,  and  his  j^ay 
would  not  be  money,  but  a  portion  of  corn  or  cattle. 

Scientists,  artists,  professional  men,  clerks,  merchants 


ITS    POWERS    AND    FUNCTIONS.  55 

railroads,  boats,  ships,  would  find  no  employment. 
Every  commercial  agency  and  pursuit  would  become 
extinct,  and  the  efforts  of  men  would  be  directed  to  the 
simple  and  l)arbarous  purposes  of  producing  a  scant}' 
living  and  gratifying  their  base  jiassions.  The  world 
would  be  shrouded  in  the  thick  darkness  of  ignorance 
and  heathenism. 

An  illustration  will  show  how  the  process  of  retro- 
gression Avould  sot  in  upon  a  nation  without  money. 

Suppose  that  some  day  every  dollar  of  money  in  the 
United  States  should  be  destroyed  and  that  we  should 
never  have  an}-"  more  money.  Up  to  that  day  the  rail- 
roads, steamboats  and  canals  would  be  read}^  to  oper- 
ate ;  stores  and  shops  would  be  full  of  goods  ;  factories, 
mines  and  mills  would  be  pouring  forth  wealtli  and 
bread  ;  editors,  divines,  scholars,  artists  and  laborers 
would  be  ready  to  supply  the  public  with  their  services  ; 
farmer's  fields  would  be  rich  in  grain  and  their  pastures 
alive  with  fatted  cattle  ;  ])anks  and  brokers  would  be 
ready  to  lend  mone}-,  buy  and  sell  coin  and  speculate 
in  securities.  But  there  would  be  no  money.  What 
would  follow? 

The  merchant  could  not  take  cam  and  cattle  for  his 
goods.  The  manufacturers  would  not  take  furs  and 
ribbons  for  their  productions.  The  scientific  and  artis- 
tic classes  could  not  take  coal  and  hides.  Professional 
men  would  not  want  a  steamboat  or  a  warehouse  of 
salt.  The  butcher  and  miller  Avould  not  mve  bread  and 
meat  for  laces  and  silk  hats.  The  jeweler  would  have 
no  use  for  a  steam  engine,  the  porter  for  jewels,  nor 
the  section  hand  for  freight  cars. 

All  business  would  be  completely  blocked.  Stocks 
would   rot   in   warehouses.       Factories    would   close. 


56         .  MONEY : 

Scholars,  scientists  and  professional  men  would  be 
driven  to  the  fields  and  streams  to  labor  or  fish  for  sub- 
sistence. Every  branch  of  industry  and  commerce 
would  be  ruined  ;  men  would  be  forced  to  the  primitive 
style  of  living  and  society  would  be  resolved  into  its 
orio-inal  elements,  because  it  is  the  exchans^e,  combiua- 
tion  and  application  of  the  mental  and  physical  powers 
of  man  as  exhibited  in  the  arts,  sciences,  commerce  and 
morals  which  evolve  the  thing  called  enlightenment, 
progress,  civilization  and  wealth.  Money  is  the  me- 
dium which  produces  the  exchange,  combination  and 
application  of  man's  mental  and  jDhysical  powers. 
Without  money  these  powers  cannot  be  profitably  ap- 
plied. Hence,  without  money  there  cannot  be  arts, 
sciences,  commerce,  civilization  or  wealth. 

It  follows  then,  that  a  nation,  in  order  to  enjoy  the 
highest  degree  of  civilization  and  wealth,  must  be  pos- 
sessed of  sufficient  exchange  power,  a  sufficient  volume 
of  money  to  secure  a  speedy  and  easy  combination  and 
application  of  all  the  mental  and  physical  powers  of 
every  citizen  and  the  exchange  of  all  the  products  of 
those  powers.  And  as  the  exchange  medium,  the  vol- 
ume of  money,  falls-  below  that  amount,  so  must  the 
nation  or  some  portion  of  its  population  tend  toward 
barbarism. 

The  amount  of  money  needed  by  a  nation  at  any  par- 
ticular time  depends  upon  the  degree  of  civilization  the 
nation  has  reached.  In  other  words,  it  depends  upon 
the  total  sum  of  mental  and  physical  force  which  the 
nation  is  capable  of  applying  in  the  industries,  arts, 
sciences  and  commerce. 

Money  increases  a  nation's  i^owcrs  of  development, 
and  the  development  of  a  nation's  powei's  increases  its 


ITS    POWERS    AND    J^UNCTIOXS.  57 

uses  for  money.  Therefore,  a  nation  must  increase  its 
volume  of  money  as  it  advances  in  civilization,  in  order 
to  sustain  a  continuing  progress. 

But  there  is  a  limit  to  the  right  use  of  money,  and 
consequently  a  limit  to  the  sum  needed  at  any  particu- 
lar time,  and  this  limit  determines  the  proper  increase. 
All  that  is  needed  is  enough  to  keep  every  brain  and 
muscle  in  the  whole  nation  usefully  and  profitably  em- 
ployed. When  the  volume  of  money  exceeds  that 
extent,  some  of  its  powers  are  then  wasted — as  a 
hundred  and  fifty  horse  power  boiler's  powers  are 
wasted  on  a  fifty  horse  power  engine  ;  or  they  are  im- 
properly directed  in  giving  an  excited  impetus  to  ex- 
changing, thus  unduly  increasing  the  commercial  and 
speculative  classes.  From  the  foregoing  Ave  conclude 
that  a  certain  indication  of  an  insufficient  supply  of 
money  is  the  existence  of  unA\^llino;  idlers  in  a  nation. 
When  this  is  the  case  the  volume  of  money  should  be 
increased  until  every  willing  hand  finds  stead}'-  and 
profitable  employment. 

At  this  point  a  difficult  problem  presents  itself.  When 
a  nation  is  supplied  with  a  sufficient  volume  of  money 
what  should  be  the  ratio  of  increase  of  money?  To 
arbitrarily  limit  the  supply  of  money,  it  appears,  would 
retard  the  progress  of  man  ;  and  to  increase  it  in  exact 
proportion  to  his  advancement  would  be  a  constantly 
increasing  ratio,  gathering  new  strength  with  every 
new  development  or  application  of  his  powers.  And 
the  question  is  complicated  somewhat  by  the  introduc- 
tion of  another  factor  into  the  calculation. 

As  a  people  advance  in  civilization  they  multiply  the 
agencies  of  exchange.  They  build  ships  and  railroads 
and  establish  banks.     Commerce  flies  upon  the  wings 


58  MONEY : 

of  the  winds  and  money  traces  through  the  fiscal  chan- 
nels with  great  rapidity. 

Thus  as  a  nation  progresses  the  powers  of  man  great- 
ly increase  the  exchange,  circulating  power,  of  money. 
Hence  it  follows  that  the  ratio  of  increase  of  money 
should  be  fixed  in  proportion  to  the  ratio  of  increase  of 
a  nation's  powers,  less  the  increase  of  the  power  of 
money  to  circulate.  Then  the  solution  would  be  as 
follows : 

To  the  sum  of  a  sufficient  volume  of  money,  add  a 
part  of  its  sum  equal  to  the  ratio  of  increase  of  the  na- 
tion's powers,  and  deduct  from  that  sum  a  part  of  itself 
equal  to  the  ratio  of  the  increase  of  the  power  of  money 
to  circulate.  But  while  it  is  conceded  on  all  hands 
that  as  a  nation  advances  the  power  of  money  to  cir- 
culate increases,  yet  it  is  apparent  the  ratio  of  the  in- 
crease of  money's  power  to  circulate  is  not  equal  to  the 
ratio  of  increase  of  a  nations  powers.  Because  banks, 
the  most  potent  increasers  of  money's  powers  to  circu- 
late, constantly  keep  in  their  vaults  large  sums  of  money 
as  reserves,  which  are  absolutely  taken  out  of  circulation, 
and  lose  their  use  as  a  medium  of  exchange.  And  as 
banks  multiply,  this  sum  of  money  taken  out  of  circu- 
lation increases. 

This  proposition  is  settled  beyond  dispute  by  the 
fact  that  during  the  rapid  progress  of  the  civilized 
world  in  the  last  300  years,  the  increased  powers  of 
man  have  necessitated  the  invention  and  use  of  paper 
money,  thus  greatly  increasing  the  volume  of  money, 
notwithstanding  the  increasing  power  of  money  to  cir- 
culate during  the  same  time.  It  is  therefore  evident 
that  a  solution  of  the  problem  cannot  be  found  by  ab- 


ITS    POWERS    AND    FUN'CTIOXS.  59 

stract  calculation,  but  must  always  depend  upon  the 
existing  conditions  of  a  nation  at  any  given  time. 

I,  therefore,  submit  the  following,  as  it  appears  to 
me  to  be  the  safest  rule  that  can  be  found  : 

First  :  Let  the  volume  of  money  be  increased  until 
every  brain  and  muscle  in  the  nation  have  constant  re- 
munerative emplo^^ment.  This  would  give  a  sum  bear- 
ing a  certain  ratio  to  population  ;  say,  for  instance,  $3S 
per  capita.  To  this  sum  add  an  equal  per  capita  amount 
for  every  addition  to  the  population.  Besides  this,  add 
a  sum  every  year  sufficient  to  cover  the  usual  per  centum 
of  loss  and  destruction  of  money.  This  would  give 
an  unvarying  per  capita  supjily  of  money,  and  increase 
the  total  volume  in  proportion  to  the  incretise  of  the 
nation's  natural  powers. 

Second  :  Let  the  government  observe  the  business 
of  the  nation  and  the  condition  of  the  people,  and  if  at 
an}^  time  a  decline  should  set  in  and  any  considerable 
number  of  people  should  be  unwillingl}'^  idle,  then  let  a 
gradual  and  steady  increase  of  the  volume  of  money  be 
provided,  until  depression  of  business  and  enforced 
idleness  disappem-. 

The  only  exception  to  this  rule  is  when  depression 
and  idleness  are  produced  by  other  than  financial  causes, 
such  as  famine,  floods  and  war,  etc.  These  are  tempo- 
rary and  accidental  causes  and  no  system  of  finances  can 
prevent  suffering  from  them .  They  are,  however,  easily 
distinguished  from  a  dearth  of  money  and  no  wise  gov- 
ernment need  fail  to  discover  and  remedy  the  latter 
cause  of  distress. 

If  at  any  time  an  over-issue  of  money  should  be 
made  it  would  be  better  to  let  it  remain  until  natural 
wear  and  tear,  loss  and  destruction  sufficiently  reduce 


60  MONEY : 

it,  because  a  forced  contraction  of  the  volume  of  money 
would  suddenly  reduce  exchanging,  produce  a  pre- 
cipitate fall  of  values  and  bankrupt  the  commercial  and 
debtor  classes,  unless  credit  should  take  the  place  of 
money,  and  this  would  only  defer  for  a  time  the  inevi- 
table destruction  of  business. 

Both  an  insufficiency  and  an  excess  of  money  are 
evils,  but  the  former  is  much  the  greater  evil.  Neither 
of  them  is  more  fraught  with  evil  than  a  declining 
volume  of  money  for  the  reasons  stated. 

This  method  of  regulating  the  volume  of  money 
would  approximate  near  enough  to  the  needs  of  a  peo- 
ple to  bring  a  high  degree  of  prosperity  to  any  nation 
regulating  its  fiscal  policy  by  it. 

Third. — Money  is  the  power  which  imparts  money 
values  to  property.  Without  it  there  could  be  no  such 
thing  as  mon^y  value.  As  the  volume  of  money,  the 
power  increases,  other  things  remaining  the  same,  it 
augments  values  and  vice  versa.  This,  as  well  as  the 
exchange  power  of  money,  is  applied  to  property  by  its 
(money's)  circulation.  Hence  as  the  volume  of  money 
diminishes  or  ceases  to  circulate  the  application  of  its 
power  diminishes  and  prices  fall  and  vice  versa. 

Money,  in  this  sense,  is  a  thing  of  relative  value. 
Hence  the  supply  of  it  and  demand  for  it  determine  its 
purchasing  power.  It  is,  thence,  seen  that  as  the  sup- 
ply is  increased  its  relative  value  is  diminished  and  vice 
versa . 

The  effects  of  this  power  of  money  are  greatly  mod- 
ified or  intensified  by  other  things,  such  as  increase 
of  demand  caused  by  increase  of  population  and  busi- 
ness, war,  famine,  flood  and  other  conditions.     But  the 


ITS    POWERS    AND    FUNCTIONS.  61 

ft 

effects  of  money  on  prices  as  stated  are  universal  with 
the  modifications  produced  by  the  causes  named. 

That  such  is  the  unvarying  hiw  of  prices  is  evident 
from  the  financial  and  commercial  histories  of  all  nations. 
The  United  States  had  $1,800,000,000  paper  in  January, 
18G6,  and  prices  ranged  high  accordingly  in  that  money. 
This  year,  1877,  the  volume  of  money  is  little  over 
$800,000,000  and  prices  are  low  accordingly.  In 
England  from  1797  to  1815  there  was  a  large  volume 
of  money  and  prices  were  high  ;  and  from  1819  onward 
for  15  years,  with  periodic  exceptions,  the  volume  of 
money  was  small  and  prices  were  very  low. 

During  the  Napoleonic  wars  all  Europe  increased 
their  volume  of  money  with  paper  and  prices  ranged 
high.  At  the  close  of  those  wars  those  powers  funded 
and  destroyed  much  of  their  paper  money,  thus  re- 
ducing the  amount  of  money,  and  a  universal  fall  of 
prices  was  experienced  there.  Exactly  the  same  results 
followed  the  contractions  of  the  volume  of  money  -m 
the  U.  S.  in  1819-21,  1837-9,  1857. 

If  money  had  no  other  than  a  direct  effect  upon  prices 
it  would  make  but  little  difference,  except  to  the  debtor 
and  creditor  classes,  whether  there  was  much  or  little 
money,  high  or  low  prices,  because  the  relative  values 
of  property  would  remain  nearly  the  same  ;  as  for  in- 
stance, if  a  horse  be  worth  $150  and  a  cow  $50  in  a  na- 
tion having  $1,800,000,000,  but  in  a  nation  having  only 
$600,000,000  the  horse  should  be  worth  but  $(30  and 
the  cow  only  $20,  the  relative  values  of  the  horse  and 
cow  would  be  unchanged.  But  money  affects  men  and 
commerce  in  a  myriad  of  ways,  and  these  effects  be- 
come causes  acting  upon  prices,  labor,  production  and 
commerce  with  great  force. 


62  MONEY ; 


When  money  is  abundant,  it,  like  everything  else  in 
abundant  suj^plj^  is  cheap  and  consequently  is  within 
the  reach  of  every  body,  but  when  scarce,  it,  like  every- 
thing else  in  scanty  supply,  is  dear  and  consequently  is 
within  the  reach  of  only  a  few  ;  and  being  dear  is  hus- 
banded and  hoarded  by  its  possessors,  circulating  slu^-- 
gishly  and  imparting  but  little  vitality  to  business  and 
the  industries.  In  "  hard  times,  "  money  is  so  scarce 
and  dear  that  thousands  of  people  are  utterly  unable  to 
possess  it.  Hence  pauperism,  crime,  revolutionary 
tendencies  and  outbreaks. 

Let  it  be  supposed  that  a  nation,  at  any  time,  has 
any  volume  of  money,  from  a  sufficiency  down  to  a 
tenth  part  of  the  amount  needed.  Every  business  in- 
terest of  the  nation  is  adjusted  to  the  volume  of  money. 
Every  department  of  the  industries  is  supplied  with  all 
the  laborers  needed,  and  everv  brain  and  muscle,  that 
the  volume  of  money  can  sustain,  are  busy.  The  pop- 
ulation increases,  say  500,000  a  year,  but  there  is  no 
increase  in  the  volume  of  money.  What  will  result? 
There  is  no  occupation  for  the  new  additions  to  popu- 
lation because  every  branch  of  business  is  full. 

It  is  true  that  they  would  be  in  demand  of  food, 
clothing  and  shelter,  which  would  tend  to  stimulate  the 
markets.  But  they  produce  also,  which  would  tend  to 
reduce  prices.  Every  prosperous  civilized  nation  pro- 
duces more  than  it  consumes.  Hence  the  increase  of 
material  wealth.  The  same  is  true  of  any  large  number 
of  citizens  of  various  classes. 

This  over  production,  as  it  is  sometimes  called,  when 
properly  applied  constitutes  the  growth  of  a  nation's 
wealth.  It  ultimately  assumes  the  form  of  houses, 
railroads,  all  substantial  improvements.     But  when  not 


ITS    POWERS    AND    FUNCTIONS.  63 

SO  applied — and    it    cannot   l)e    so    applied  or  iiUilized 

without  plenty  of  money — it  becomes  a  source  of  pov- 
erty and  distress  until  production  declines.  This 
500,000  new  population  would  produce  more  than  they 
would  consume.  The  net  results,  then,  of  their  pres- 
ence and  powers  would  be  to  "  glut  the  markets  ' '  and 
reduce  prices,  in  the  absence  of  an  increase  of  the  vol- 
ume of  money,  because  as  the  increase  of  supply  of 
products  exceeds  the  increase  of  demand  for  them  they 
decline  in  value.  The  necessary  result  would  be  de- 
pression, declining  markets  and  loss  in  every  branch  of 
business  affected  by  the  increased  products,  and  as  so 
great  a  number  as  half  a  million  people  would  represent 
nearly  every  branch  of  business,  and  as  every  branch 
of  business  bejirs  some  relation  to  and  affects  every 
other  branch  of  l)usiness,  the  whole  business  interests 
of  the  country  would  be  subjected  to  depression,  de- 
clining markets  and  loss  by  the  increase  of  population 
without  an  increase  of  money. 

If  the  nation  should  continue  to  increase  in  popula- 
tion without  an  increase  of  money,  continually  falling 
markets,  depression  and  loss  in  business  would  drive 
one  after  another  out  of  business  until  the  industries, 
commerce,  the  arts  and  sciences  would  be  abandoned. 
Retrogression  would  be  slow  but  sure  and  steady. 

But  suppose  that  instead  of  the  volume  of  money  re- 
mainins;  the  same  it  should  be  diminished.  In  such  a 
case  the  decline  of  prices,  depression  and  loss  in  busi- 
ness would  be  quick  and  terrible,  precipitating  the 
nation  into  bankruptcy,  millions  into  distress  and 
breeding  a  myriad  of  criminal  impulses  and  revolution- 
ary ideas. 

Every  civilized  nation  has  passed  through  such  or- 


64  MONEY : 

deals.  The  history  of  the  reductions  of  the  volume  of 
money,  and  crises  in  England  in  the  years  1816,  1819-23, 
1825,  1829-33,  1837,  1847,  1857,  1866  and  in  the 
United  States  in  1817-21,  1837-39,  1847,  1857,  1861, 
1866-77  furnish  indubital)le  evidences  of  the  terrible 
effects  produced  on  society  and  business  by  the  des- 
tructive forces  of  a  diminishing  or  reduced  volume  of 
money. 

The  property  wealth  of  a  nation  does  not  consist  of 
men  or  money.  It  consists  of  the  surplus  products,  or 
over  productions  of  the  powers  of  men  and  money  com- 
bined. Without  either,  no  national  wealth  can  be  pro- 
duced. Witness  the  condition  of  the  savage  tribes  who 
have  no  money.  With  an  insufficiency  of  money  the 
growth  of  national  wealth  must  be  slow  and  labored. 
With  a  declining  volume  of  money  long  continued,  nat- 
ional decay  is  inevitable.  Witness  the  nations  which 
exist  now  only  in  name,  notably  the  Eoman  Empire 
which  had  $1,800,000,000  in  the  time  of  Augustus  and 
but  $400,000,000  in  the  time  of  Justinian.  Witness 
the  decay  of  nations  and  the  sufferings  of  humanity 
during  the  dark  ages  when  there  was  no  paper  money 
and  the  world's  mines  failed  to  produce  metal  money 
enough  to  vitalize  and  utilize  the  human  powers. 

On  the  other  hand  a  large  supply  of  money  energizes, 
applies  and  utilizes  man's  powers,  and  the  two  together 
evolve  civilization  and  produce  wealth.  Witness  Israel 
in  the  days  of  David  and  Solomon  when  the  wealth  of 
Ophir  Avas  theirs  ;  Persia,  Greece  and  Rome  when  they 
owned  the  mines  or  commanded  the  money  of  the  world. 
Witness  the  rapid  and  glorious  advancement  of  Europe 
and  America  in  civilization  and  wealth  since  the  doub- 
ling of  their  money  by  the  invention  and  use  of  paper 


ITS    POWERS   AND   FUXCTiaXS.  65 

mone}-  in   the   financial   and  commercial  affairs  of  the 
work] . 

It  follows,  that  a  shrinking;  volume  of  money  and 
falling  prices  retard  man's  progi-ess  and  atilict  him  with 
suffering,  and  a  sufficient  supi)ly  of  money  utilizes  all 
his  powers,  promotes  civilization  and  produces  wealth 
and  happiness. 

FonrtJi. — Money  circulates.  This  is  its  proper  use. 
It  performs  the  functions  of  money  only  when  it  circu- 
lates, because  when  hoarded  or  lying  in  bank  vaults  or 
the  ijovernment  treasury  it  is  neither  exchanoinir  nor 
sustaining  or  measuring  A'alues.  Under  the  customs 
or  financial  systems  of  most  nations  it  is  not  only  proper 
but  necessary  that  banks  and  the  treasury  should  hold 
money  as  reserve,  safety  or  redemption  funds.  But 
the  fact  remains  that  the  money  so  held  does  not  per- 
form the  functions  of  money  while  so  held. 

The  circulating  property  of  money  or  its  currency  is 
the  thing  which  puts  into  action  its  powers.  In  fact, 
its  currency  as  an  exchan<re  medium  constitutes  it 
money. 

AVhat  made  irold  and  silver  money?  At  first  men 
took  these  metals  on  account  of  their  beauty  and  for 
ornamentation.  While  so  taken  they  were  in  demand 
simply  as  commodities  on  account  of  their  inherent 
properties.  After  awhile  they  came  so  into  demand  for 
their  beauty  and  purposes  of  ornamentation  that  men 
knew,  or  believed,  they  could  exchange  them  for  other 
things  with  other  men  at  will,  and  they  took  them,  not  for 
their  beauty,  for  ornamentation  or  their  inherent  prop- 
erties, l>ut  from  an  entirely  new  motive  and  for  a  new 
purpose.     This  new  motive  was  to  exchange  them  with. 


66  MONEY : 

other  men  for  other  things,  and  it  arose  exclusively 
from  the  knowledge  or  belief  that  other  men  would  so 
take  them.  At  this  point  a  new  property  attached  to 
gold  and  silver.  It  was  the  property  of  an  exchange 
medium,  money.  This  new  property  was  not  inherent 
in  the  metal.  It  was  extrinsic.  It  was  the  w^illing- 
ness  of  men  to  receive  them  in  exchange  for  other 
things,  that  then  attached.  This  willingness  of  men 
to  so  take  them  made  them  current  and  this  constituted 
them  money. 

Money  may  or  may  not  have  a  commodity  value.  It 
is  not  essential  that  it  should  possess  any  commodity 
value  whatever.  This  is  not  only  so  in  theory  but  in 
fact.  The  Indian  Wampum  was  adopted  as  money  by 
a  number  of  the  colonies  and  made  a  legal  tender  by 
Connecticut,  although  it  was  only  a  rude  sea  shell  bead 
carved  out  by  the  untutored  savage  and  among  white 
men  possessed  no  commodity  value  whatever.  The 
wdllingness  of  Indians  to  take  wampum  made  it  money 
wath  them.  The  lesrislation  of  Connecticut  made  white 
men  willing  to  take  it  as  money  in  that  colony  at  a  legal 
tender  value  arbitrarily  fixed  by  law,  although  as  a 
commodity  it  was  worthless  among  civilized  people. 
So  it  is  with  our  "Greenbacks."  They  circulate  as 
money  because  the  people  are  willing  to  take  them  as 
such,  notwithstanding  they  possess  no  commodity  value 
whatever.  This  willingness  of  the  people  to  so  receive 
them  was  caused  by  the  act  of  congress  \yhich  created 
them.  ' 

Bank  paper  circulates  as  money,  not  necessarily  be- 
cause of  its  redeemability,  but  because  of  the  willing- 
ness of  men  to  take  it.  This  is  exemplified  by  the  his- 
tory of   1837-40.     Many   a   time   Illinois   bank  notes 


ITS    rOWERS    AND    FUNCTIONS.  67 

circulated  in  Missouri  for  some  time  after  the  banks 

had  failed  and  the  prospects   of  redemption  were  all 

gone. 

"The  wild-cat  currencies  of  the  AVestern  States, 
which  were  issued  in  such  abundance  some  forty  years 
ago,  could  never  have  got  into  circulation  but  from  a 
belief,  on  the  part  of  those  who  took  them,  that  they 
could  shove  them  off  upon  somebody  else  without  loss 
to  themselves." — Money,  its  Laws  and  History,  by 
Henry  V.  Poor. 

The  notes  were  utterly  worthless  as  redeemal^le  paper, 
but  they  performed  all  the  functions  of  money.  AVhy  ? 
Simply  because  men  knew,  or  believed,  other  men  would 
take  them,  hence  they  willingly  received  them. 

As  we  have  seen,  the  powers  of  money  are  three : 

1st.  A  measure  of  values.  This  function  is  idealis- 
tic and  arises  from  the  other  powers  of  money,  and 
may  be  performed  without  anything  but  a  name  to  rep- 
resent it. 

2nd.  It  is  a  medium  of  exchange,  and  as  such  is  a 
thing,  not  an  idea. 

3rd.  The  power  which  creates,  regulates  and  con- 
trols prices. 

The  two  latter  are  the  more  important  functions  of 
money  and  can  be  exercised  only  by  its  circulation.  Its 
circulation  or  currency  depends  absolutely  upon  men's 
willingness  to  take  it  as  money.  The  willingness  of 
men  to  take  a  thing  as  money  is  produced  by : 

1st.     Common  consent  or  custom,  and 

2nd.     By  Legislation. 

We,  therefore,  define  money  to  be  anything  floating 
on  the  tide  of  puhlic  opinion,  as  a  measure  and  creator 
of  prices  and  a  medium  of  commercial  exchanges. 


68  MONEY : 

Fifth. — ^Monej  may  consist  of  anything  that  people 
are  willing  to  receive  as  money.  Hence,  iron,  copper, 
nickel,  salt,  cattle,  sea  shells,  wampum,  tobacco,  wood, 
gold,  silver  and  paper  have  been  money. 

This  proposition  is  sufficiently  discussed  in  other 
chapters  of  this  work,  and  we  dismiss  it  here  with  the 
remark  that  those  who  claim  that  money  must  possess 
intrinsic  value  confound  that  with  commodity  or  merch- 
antable value.  Intrinsic  value  is  essential  to  money. 
But  what  is  intrinsic  value  ?  It  is  simply  the  fitness  of 
a  thing  for  use.  The  intrinsic  value  of  a  thing  is  very  dif- 
ferent from  its  commercial  or  commodity  value.  These 
values  bear  little  or  no  relation  to  each  other.  Iron  is 
said  to  be  of  much  greater  intrinsic  value  than  gold, 
yet  the  commercial  or  commodity  value  of  a  pound  of 
gold  is  many  times  that  of  a  pound  of  iron.  The  at- 
mosphere has  no  merchantable  value  and  yet  its  intrin- 
sic value  is  inestimable  ;  man  cannot  survive  without  it. 
Paper  is  well  fitted  for  use  as  money,  in  many  respects  it 
is  much  better  fitted  for  such  use  than  gold  or  silver. 
It  is  durable,  less  bulky  than  the  metals  and  much  more 
convenient  to  handle  and  carry.  Its  intrinsic  value  for 
use  as  money  is  equal  to  if  not  greater  than  that  of  the 
metals. 

Sixth. — The  Constitution  of  the  United  States  em- 
powers Congress  to  make  money  of  any  material  or 
substance  whatever. 

Under  the  Articles  of  Confederation  and  Perpetual 
Union  between  the  States  the  only  power  the  Congress 
had  regarding  money  was  the  "sole  and  exclusive  right 
and  power  of  regulating  the  alloy  and  value  of  coin 
struck  by  their  own  authority  or  by  that  of  the  respec- 


ITS    POWERS   AND    FUNCTIONS.  69 

tive  States."  This  provision  is  remarkable  for  several 
reasons.  First,  it  does  not  name  the  word  money  at 
all ;  secondly,  it  does  not  in  terms  confer  upon  Congress 
the  power  to  make  money ;  and  the  subsequent  acts  of 
the  Congress  of  the  Confederation  show  that  they  con- 
strued the  provision,  not  as  conferring  power  to  make 
money,  but  as  power  to  regulate  the  nominal  value  and 
alloy  of  coins.  Those  Congresses  never  passed  any  le- 
gal tender  or  other  acts  indicating  that  they  had  power 
to  make  money  or  to  make  it  a  legal  tender.  In  those 
Articles  of  Confederation  was  no  provision  whatever 
conferring  upon  or  taking  from  the  States  the  right  to 
make  money  or  to  make  it  a  legal  tender.  It  is  evident 
that  those  Articles  left  the  inherent  power  of  making 
money  and  declaring  it  a  legal  tender  with  the  several 
States,  and  the  States  and  statesmen  of  the  revolution- 
ary period  so  understood  it.  This  is  demonstrated  by 
the  fact  that  the  several  States,  without  special  provis- 
ions of  their  several  constitutions,  did  by  legislative  en- 
actments adopt ^ro  rata  portions  of  the  "Continental" 
money  as  their  own,  and  made  it  a  legal  tender  by  law. 
After  the  close  of  the  Revolution,  the  States,  desiring 
to  form  a  more  perfect  union  and  to  confer  upon  the 
Federal  Government  greater  and  on  some  points  exclu- 
sive power,  adopted  our  present  constitution.  This, 
our  constitution,  in  terms  prohibits  the  States  from  ex- 
ercising that  inherent  power  of  government  relating  to 
money,  to-wit :  prohibits  them  from  making  anything 
but  gold  and  silver  coin  a  tender  in  payment  of  debts, 
and  confers  upon  Congress  in  terms  the  power  to  coin, 
that  is,  to  make,  invent,  stamp  money  and  regulate  the 
value  thereof.  It  appears  from  these  provisions  evident 
to  the  mind  of  the  author  that  they  were  intended  to 


70  MONEY : 

and  did  take  away  from  the  States  the  inherent  power 
of  government  to  make  money  and  to  make  it  a  legal 
tender,  and  in  terms  conferred  that  power  upon  Congress. 
It  appears  unreasonable  that  the  framers  of  the  consti- 
tution, the  statesmen  who  advocated  it  and  the  States 
which  adopted  it,  should  have  intended  that  broad  and 
comprehensive  provision  ' '  to  coin  money  and  regulate 
the  value  thereof ' '  to  embrace  in  it  a  restriction  or  lim- 
itation of  the  identical  power  it  purports  to  confer  upon 
Congress.  To  coin  money  means  to  make,  invent,  fab- 
ricate any  kind  and  all  kinds  of  money.  If  it  had  been 
intended  to  limit  the  making  power  to  metal  money,  it 
would  have  been  stated  thus  :  to  coin  metal  money,  etc. 

Men  have  differed  much  in  their  construction  of  this 
constitutional  provision.  Thomas  Jefferson,  John  C. 
Calhoun  and  others  held  the  opinion  that  the  constitu- 
tion conferred  power  on  Congress  to  issue  paper  money. 
Daniel  Webster  and  others  held  an  opj)osite  opinion. 

The  question  has  been  passed  upon  by  the  Supreme 
Court  of  the  United  States  in  an  opinion  adjudging  U. 
S.  notes,  "Greenbacks,"  a  legal  tender  for  debts  created 
before  the  passage  of  the  act  creating  the  notes ;  and 
this  opinion  may  be  held  as  settling  the  question.  But, 
notwithstandng-that  objection,  many  yet  hold  that  Con- 
gress has  no  constitutional  power  to  make  anything  but 
gold  and  silver  money.  This  is  an  error,  as  will  appear 
upon  a  construction  of  the  constitutional  provision. 

The  constitution  of  the  United  States  confers  upon 
Congress  the  power  "to  coin  money  and  regulate  the 
value  thereof."  This  provision  covers  the  whole  power 
of  Congress  to  make  money,  and  its  meaning  defines 
that  power.  There  is  another  provision  of  the  consti- 
tution which  forbids  any  State  from  making  anything 


ITS    POWERS    A>'D    FUNCTIONS .  71 

but  gold  and  silver  coin  a  tender  in  payment  of  debts. 
The  fact  that  the  framers  of  the  constitution  were  par- 
ticular to  qualify  the  word  coin  in  Section  10,  Art.  I, 
with  the  limiting  words  "gold  and  silver,"  shows  that 
they  intended  the  words  ''coin"  and  "money"  in  Sec- 
tion 8  to  mean  more  than  gold  and  silver  money. 

This  is  proved  beyond  dispute  by  the  act  of  Congress 
passed  April  2nd,  1792,  when  the  ver}' men  who  framed 
the  constitution  were  living  and  many  of  them  were  in 
high  official  positions,  and  when  the  ideas  which  pre- 
vailed at  the  time  of  the  adoption  of  that  instrument  as 
the  organic  law  of  the  land  were  in  their  full  stren-nh 
and  vigor.  That  act  pro\-ided  for  the  coinage,  not  only 
of  gold  and  silver,  but  copper  also  into  money.  Then 
it  is  clear  that  Congress  has  constitutional  power  to  make 
other  than  the  common  law,  gold  and  silver,  money. 
Then  the  question  arises,  of  what  material  or  substance 
may  Congi'ess  make  money? 

To  answer  this  question,  an  examination  of  the  deri- 
vation and  meaning  of  the  words  "coin,"  "money"  and 
*'to  coin  money"  is  necessary. 

The  noun  "coin"  is  derived  from  the  Latin  word 
cuneus,  which  means  a  wedge  ;  a  company  of  men  stand- 
ing thick  together,  etc.  As  relating  to  money  the  word 
primarily  meant  the  die  used  in  stamping  money.  The 
English  meaning  of  the  word  is,  money  stamped;  a 
corner ;  a  wedge  ;  a  piece  of  metal  on  which  certain 
characters  are  stamped  making  it  legally  current  money  ; 
that  which  serves  for  pa}Tnent  or  recompense.  There 
is  nothins:  in  the  Latin  or  English  meanins:  of  the  word 
which  relates  to  any  particular  substance. 

It  will  be  observed,  that  even  when  it  relates  to  metal 
money,  the  stamp,  not  the  metal,  makes  it  money.     Tha 


"^2  MONEY : 

word  "money"  is  derived  from  the  Latin  word  moneta, 
meaning  the  adviser:  a  surname  of  Juno,  in  whose 
temple  money  was  coined.  It  is  called  money  because 
each  piece  has  stamped  on  it  an  index  or  character  which 
advises  or  informs  what  it  is.  There  is  nothing  what- 
ever in  the  word  which  means  metal  or  any  particular 
substance. 

These  words,  which  neither  meant  metal,  any  partic- 
ular material,  a  measure  of  values,  nor  a  medium  of  ex- 
change, were  for  the  reasons  stated  applied  to  the 
things  commonly  used  in  effecting  commercial  ex- 
changes. Hence  everything  which  has  filled  that  office 
has  been  called  "money." 

The  words  "to  coin,"  in  the  constitutional  provision, 
are  not  nouns,  but  a  verb,  meaning  to  stamp  and  convert 
into  money ;  to  mint ;  to  form  by  stamping  ;  to  make  ; 
to  fabricate  ;  to  invent ;  to  originate. 

It  may  be  the  verb  transitive  of  anything  that  can 
be  stamped,  made,  fabricated  or  invented.  As  for  in- 
stance, Shakespeare  coined,  that  is,  made  or  invented  a 
word ;  the  government  coins,  that  is  stamps,  makes, 
fabricates  money. 

The  verb  "to  coin"  bears  no  significance  whatever  of 
the  material,  quality  or  character  of  the  thing  coined, 
but  relates  exclusively  to  the  act  to  be  performed ;  that 
is,  to  stamping,  making,  inventing,  fabricating.  The 
act  may  be  performed  on  any  material.  There  is  then, 
nothings  in  the  meaninor  of  these  words  which  restricts 
the  powers  of  Congress  to  the  coinage  of  metal  money 
only,  much  less  to  gold  and  silver  only. 

The  word  money  is  currently  accepted  to  mean  any 
medium  of  commercial  exchanges  in  general  use  in  any 
country.     The  conclusion  of  the  whole  matter  is,  there- 


ITS    POWERS    AXD    i'U^•CTIONS.  73 

fore,  that  the  above  named  constitutional  prpyiaion  em- 
powers Congress  to  make,  stamp,  invent,  fabricate 
money  of  any  substance  whatever. 

Hence  the  currency  commonly  called  "Greenbacks" 
has  performed  all  the  functions  of  money,  and  if  its  re- 
deemability  and  the  promise  to  pay  wei*e  removed  it 
would  be  absolute  money  to  all  intents  and  purposes. 
Some  object  to  Government  issuing  legal  tenders  on 
the  grounds  that  the  kind  and  quantity  would  depend 
upon  the  whims  of  Congresses  and  the  popular  outcries 
of  the  people.  Quite  as  forcible  an  objection  lies" 
against  banks  of  issue  on  the  grounds  that  the  quantity 
and  quality  of  the  money  issued  by  them,  not  only  de- 
pend upon  the  whims,  the  wdsdom  or  folly,  the  economy 
or  profligacy,  of  those  who  happen  to  control  the  banks, 
but  they  also  depend  upon  the  notions  of  the  chaitering 
power,  and  are  affected  by  foreign  trade  and  foreign 
panics. 

The  systems  of  redeemable  currency  have  produced 
such  quick  changes  in  the  volume  and  value  of  the 
paper  and  afflicted  the  nations  with  so  frequent  and  ter- 
rible money  crises,  that  the  probability  is,  it  would  be 
impossible  for  national  Congresses  to  produce  so  great 
and  frequent  evils  by  legislation  upon  a  system  of  irre- 
deemable legal  tenders. 


CHAPTER   II. 


STANDARD    OF    VALUES  :       GOLD    AXD    SILVER. 

« 

Upou  this  branch  of  the  science  of  money  there  are 
two  important  and  exactly  opposite  theories. 

One  class  holds  that  only  gold  and  silver  are  money  ; 
that  their  values  are  uniform  throughout  the  world  and 
remain  nearly  the  same  throughout  all  time,  and  are 
always  determined  by  the  cost  of  their  production 
alone,  and  hence  are  absolute. 

The  other  class  holds  the  exact  opposite. 

It  has  been  shown  in  the  preceding  pages  that  the 
term  money  has  been  applied  to  and  its  functions  per- 
formed by  many  things  beside  gold  and  silver. 

Anything  which  by  the  common  consent  of  a  people 
or  by  force  of  law  has  been  used  as  a  common  measure 
of  values  and  medium  of  exchange  has  been  money. 
The  fact  that  bank  issues  and  legal  tender  notes  perform 
all  the  functions  of  money,  a  standard  of  values-,  and 
are  money  to  all  intents  and  purposes,  is  too  well  known 
and  understood  by  the  people  of  the  United  States  to 
call  for  further  remarks  here  upon  that  point. 

It  might  be  admitted  that  gold  and  silver  were  more 
nearly  uniform  in  value  over  the  world  than  any  other 
money    or  article  of  property,  and   yet  be  sho^\^l  that 


GOLD    AND    SILVER.  75 

they  were  not  the  best  mone}',  the  best  standard  of  val- 
ues, for  a  nation  for  its  internal  business. 

But  while  gold  and  silver  appear  to  be  uniform  in 
value  over  the  world,  thev  are  not  in  fact  uniform  in 
value,  as  will  be  seen  in  subsequent  pages,  and  their 
difference  in  values  in  different  nations  at  the  same 
time  is  the  power  which  has  brought  periods  of  tmancial 
and  commercial  ruin  to  all  nations  having  only  gold 
and  silver  money,  or  paper  money  redeemable  in  them. 

In  this  difference  of  their  values,  i.  e.  purchasing 
power,  in  different  nations  at  the  same  time,  lies  the  evil 
which  makes  them  an  unsteady,  an  unsafe  standard  of 
values  for  the  internal  commerce  of  nations  ;  ])ecause 
when  they  are  cheaper,  i.e.  their  pm'chasing  power  is 
less  in  one  nation  than  in  another,  they  will  at  once 
seek  their  highest  market,  induce  imports  into  the  coun- 
try where  they  are  cheapest,  and  flow  out,  thus  reduc- 
ing the  volume  of  money  and  prices  at  home,  bringing 
commercial  and  tinancial  depression.  Their  own 
movements  thus  change  their  measuring  powers, 
chanire  their  standins;  or  height  as  a  standard  of  values 
in  the  nation.  It  so  happens,  therefore,  that  any  na- 
tion which  adopts  for  its  in1?ernal  commerce,  the  world's 
standard  of  values,  imposes  upon  itself  the  evil  financial 
effects  which  flow  from  all  serious  disturbances  of 
financial  and  commercial  affairs  of  all  other  nations 
with  which  it  has  commerce. 

It  will  be  the  object  of  this  article  to  show  that  the 
values  of  srold  and  silver  are  not  uniform  and  are  not 
the  same  as  the  cost  of  their  production,  and  that  they 
are  not  and  never  can  be  a  uniform  standard  of  values. 

That  this  is  true  is  proved  by  the  foreign  balances 
of  trade  which  accrue  a<:;ainst  the    commercial  nations 


76  STANDARD    OF    VALUES  : 

of  the  earth  every  year.  It  has  been  well  and  truly 
said  that  foreign  commerce  is  barter.  The  tendency  is 
•to  an  equal  exchange  of  commodities.  Wherever  this 
equilibrium  is  broken,  and  a  balance  to  be  paid  in  coiu 
occurs,  there  is  a  cause  for  it. 

Where  two  nations  trade  with  each  other,  each  is  in 
demand  of  some  commodity  of  the  other.  These  mu- 
tual demands  will  produce  trade  which  will  mutually 
settle  accounts  so  long  as  the  imported  articles  are  in 
greater  demand  in  each  importing  nation  than  the 
articles  exported  by  it. 

But  when  the  home  demand  for  the  home  article 
equals  the  demand  for  the  foreign  article,  then  a  falling 
oif  in  imports  or  a  foreign  balance  must  occur.  The 
values  of  imported  articles  in  the  importing  country 
are  determined  by  their  prices  in  that  country — not  in 
the  nation  exporting  them ;  and  these  values  when 
considered  for  the  purpose  of  foreign  trade  are  coin, 
not  paper  money,  prices. 

Every  importer  so  estimates  the  cost  and  value  of 
his  imports  ;  and  whenever  an  order  is  given  by  him  to 
a  foreign  house  for  articles,  he  does  it  expecting  to  pay 
for  thcfu  in  coin  or  its  equivalent. 

He  imports  cassimeres  extensively,  for  instance, 
knowing  that  they  must  be  paid  for  by  him  in  coin  or 
its  equivalent.  He  does  this  in  view  of  the  home  prices 
and  demand  for  cassimeres. 

At  the  end  of  the  year  or  any  period  of  settlement, 
he  finds  a  balance  of  $1,000, 000  against  him.  This  he 
pays  in  coin  or  its  equivalent.  This  transaction  de- 
monstrates a  greater  demand  for  cassimeres  in  the  im- 
porting country  at  the  prices  they  bear  than  for  the 
gold  paid  for  them  ;  and  in   the    exporting  country  it 


GOLD    AND    SILVER.  77 

demonstrates  a   greater  demand   for  coin  than  for  the 
cissimeres  at  the  prices  they  hear  there. 

We  give  the  importer  credit  for  ordinary  Imsiness 
capacity.  lie  would  not  import  the  cassnneres  unless 
he  could  realize  a  profit  on  them,  which  he  could 
not  do  unless  the  coin  value  of  them  was  sufficiently 
greater  in  his  country  than  in  the  ex|3orting  country 
to  cover  all  costs  of  transportation,  warehousing, 
insurance  and  duties,  besides  a  reasonalde  profit  on 
the  investment. 

In  this  case  the  purchasing  power,  that  is  the  value,  of 
thS  coin  with  reference  to  the  cassimeres  would  be  dif- 
ferent in  the  two  countries.  It  would  be  greater  in  the 
exporting  than  in  the  importing  country. 

The  same  process  will  apply  to  every  article  which 
enters  into  foreign  commerce,  and  the  same  conclusion 
is  incvital)le.  Ai^i2:re<zatino:  the  whole  foreign  com- 
merce  of  any  or  all  nations,  wherever  there  is  a  foreign 
balance  against  any  nation  it  indicates  in  that  nation  a 
smaller  value  of  coin  with  reference  to  the  articles  im- 
ported than  in  the  nation  to  which  the  balance  is  due. 

Such  is  the  correct  method  of  estimating  the  values 
of  coin  in  different  nations.  It  is  a  fundamental  error 
to  attempt  to  fix  an  arbitrary  value  on  coin.  There 
is  not,  there  cannot  be,  such  a  thing  as  absolute  un- 
chano;in2;  value. 

Value  is  simply  a  commercial  relation  of  things.  If 
one  ask  the  value  of  a  horse,  he  may  be  told  that  he  is 
worth  two  cows,  but  properly  his  value  would  be  ex- 
pressed in  money,  as,  for  instance,  a  hundred  dollars. 
What  does  this  value  of  the  horse  indicate  or  express? 

That  the  horse  is  worth  as  much  in  the  business 
world   as    a    hundred   dollars   in   money,    and   is    as 


78  STANDARD    OF    VALUES  : 

much  in  demand  at  the  price  he  bears  as  any  other  thing^ 
at  the  price  it  bears. 

If  one  ask  the  value  of  258  gi-ains  of  gold,  and  be 
told  they  are  worth  ten  dollars,  he  has  learned  nothing- 
of  the  value  of  money.  If  he  be  told  that  ten  dollars 
in  o;old  are  worth  258  o;i-ains  of  that  metal,  he  is  ianorant 
of  the  value  of  jrold  in  buving  an^'thins'  else.  But  when 
he  is  told  that  258  gi*ains  of  gold  are  ten  dollars,  and 
that  ten  dollars  vdll  buy  one  acre  of  land,  a  cassimere 
coat,  a  week's  board  and  lodging,  or  pay  his  passage  200 
miles  on  the  railroad,  he  learns  something  of  the  vaj[ue 
of  o-old.  Thus  and  onlv  thus  can  the  A'alues  of  gold 
and  silver  be  estimated.  It  is  their  purchasing  power. 
Gold  and  silver  are  worth  exactly  what  they  will  buy 
— nothmg  more,  nothing  less. 

The  purchasing  power,  ^.  e.,  value  of  these  metals,  is 
different  in  different  countries  at  the  same  moment  of 
time,  as  has  been  shown.  They  are  also  different  in  any 
one  or  all  nations  at  different  times,  as  is  shoAvn  by  the 
changing  values  of  property  at  different  periods.  For 
instance,  the  immense  products  of  Calif ornian  and  Aus- 
tralian mines  caused  the  value,  /.  e.,  purchasing  power, 
of  gold  to  fall  from  20  to  50  percent,  from  1850-55  be- 
low that  of  1840-48  ;  and  the  immense  consumption  of 
the  precious  metals  in  the  arts  during  the  last  few  years 
is  noAV  rapidly  appreciating  their  values,  i.  e.,  purchasing 
power  to  anti-golden  era  periods. 

The  comparative  values  of  gold  and  silver  with  refer- 
ence to  each  other  have  fluctuated  almost  as  gi-eatly  as 
the  values  of  other  articles.  In  1543  an  ounce  of  gold 
was  worth  only  11.10  ounces  of  silver ;  now  it  is  worth 
about  16.50  ounces.     Silver  has  declined  since  1870  in. 


GOLD    AND    SILVER.  79 

comparison  with  gold  only.     Its  purchasing  power  over 
property  has  gi'catly  increased. 

Take  the  prices  of  land  for  illustration  of  the  chang- 
ing value  or  purchasing  power  of  gold  and  silver. 

In  1870,  it  was  worth  on  an  average  over  the  United 
States  75  per  cent,  more  than  it  is  now  (1877).  A  piece 
of  land  worth  $1750  in  the  former  year,  in  legal  ten- 
ders, would  sell  now  for  about  $1000.  Making  the 
proper  discounts  for  gold  premium,  the  net  difference 
in  the  o-old  value  of  the  land  then  and  now  would  be 
about  $450. 

The  value  of  real  estate  rents  in  the  great  cities  also 
illustrate  the  increased  values  of  coin.  They  have  fal- 
len from  25  to  50  and  in  many  places  100  per  cent, 
since  1870.  There  is  not  an  acre  more  of  land  in  the 
U.  S.  and  territories  than  in  1S70,  but  the  population 
has  considerably  increased.  This  would  enhance  the 
values  of  lands  and  rents  if  other  things  remained  the 
same. 

But  prices  and  rents  of  land  ha^^ng  fallen  so  greatly 
indicate  a  potent  cause  somewhere,  and  that  cause  is  the 
diminution  of  the  aairreorate  sum  of  monev  in  the  country 
and  the  increased  intensity  of  demand  for  it  as  compared 
vrith  the  demand  and  supply  of  lauds  and  houses. 
Hence  the  fall  of  the  coin  values  as  well  as  the  fall  of 
paper  values  of  property,  and  the  increased  purchasing 
power  or  values  of  coin  and  paper  money  in  this  country, 
since  1870.  Consider  also  the  different  values,  in  gold 
and  silver,  of  an  acre  or  block  of  ground  in  different 
parts  of  the  United  States  or  any-  State  or  in  different 
nations  of  the  earth  at  the  same  moment  of  time. 

An  acre  of  jjood  rich  soil  on  the  western  borders  of 
Texas,  where  the  climate  is  delicious   and  the  seasons 


80  STAXDAED    OF    VALUES  .* 

are  perfectly  adapted  to  production,  is  worth,  perhaps, 
ten  cents  in  gold.  An  acre  of  no  better  soil,  situate 
in  a  harder  climate,  in  the  most  populous  mral  district 
of  Ohio,  is  worth, perhaps,  one  hundred  dollars  in  gold. 
K  the  values  of  gold  and  silver  be  absolute,  why  does 
it  take  a'  thousand  times  as  much  of  them  to  buy  an 
acre  in  Ohio  as  in  Texas  ?  The  answer  is,  that  the  values 
of  gold  and  silver  are  not  absolute,  but  relative,  like  the 
values  of  everj^thing  else. 

In  the  case  supposed,  the  demand  for  laud  in  West- 
ern Texas  is  very  slight,  because  it  is  almost  beyond 
the  borders  of  ci^'ilization  and  subject  to  incursions  by 
Indians  and  Mexicans,  and  the  supply  of  it  is  millions 
of  surplus  acres,  and  when  the  value  of  these  lands  is 
compared  with  that  of  gold  they  stand  as  one  acre  to 
ten  cents. 

In  Ohio  the  inhabitants  are  thickly  settled,  no  Indians 
or  Mexicans  disturb  the  peace  or  property  of  the  peo- 
ple, the  State  is  desirable  to  reside  in,  hence,  land  is  in 
great  demand  and  the  value  of  it  as  compared  with  that 
of  o-old  stands  as  one  acre  to  one  hundred  dollars  in  ffold. 
That  is  to  say,  in  one  case  one  acre  is  worth  in  the 
commercial  world  just  as  much  as  ten  cents  in  gold  is, 
and  in  the  other  case  an  acre  is  worth  as  much  as  $100 
in  ffold  is  worth.  If  sold  be  increased  or  decreased  in 
demand,  the  sfold  values  of  these  lands  would  decrease 
or  increase  accordingly ;  and  if  these  lands  should  in- 
crease or  decrease  in  demand,  then  their  gold  values 
would  increase  or  decrease  accordingly. 

Pursue  this  process  with  every  article  of  commerce 
and  property,  measuring  their  values  in  coin,  in  all 
countries  at  the  same  time  and  at  different  times,  and 
the  conclusion  is  irresistible  :  that  the  values   of  the 


GOLD    AND    SILVER.  81 

precious  metals  change — are  different  indifferent  nations 
at  the  same  time — and  are  determined,  controlled  and 
changed  exactly  like  the  values  of  commodities  are. 
That  is  to  say,  they  are  fixed  and  controlled  by  the 
supply  of  them  and  the  demand  for  them  as  compared 
with  the  supply  of  and  demand  for  an}i;hing  or  every- 
thing else. 

The  bullionists  hold  that  the  item  of  demand  for  gold 
and  silver  should  not  be  taken  into  the  account,  because, 
say  they,  it  is  universal. 

This  is  not  true.  Demand  in  the  commercial  and 
fiscal  world  is  not  a  mere  icif<h  for  a  thing.  It  may  be 
true  that  all  men  wish  for  o-old  and  silver,  but  it  is  not 
by  any  means  true  that  all  men  are  in  demand  of  them. 
Out  of  the  46,000,000  people  in  the  United  States  now, 
there  are  not,  perhaps,  ten  thousand  in  demand  of  gold 
and  silver  money.  Demand  means  a  call  for  some  ar- 
ticle in  a  business  sense.  It  means  that  money,  prop- 
erty, securities  or  labor  is  put  to  sale  to  buy  the  thing 
wanted.  Demand  for  gold  and  silver  means  that  prop- 
erty, securities  or  labor  are  offered  in  the  commercial 
or  money  markets  for  them. 

A  ragged  urchin  may  stand  on  the  street  peering 
through  a  bank  door  and  ivish  for  the  piles  of  gold  on 
the  banker's  table,  but  this  is  xto  demand  for  gold. 
This  wish  might  lead  the  urchin  to  offer  his  services  as 
a  boot-black  for  gold.  This  offer  of  services,  not  the 
wish,  would  constitute  a  demand,  but  it  must  be  admit- 
ted to  be  a  very  slight  one,  not  likely  to  affect  the  gold 
markets  seriously. 

But  suppose  the  $3,300,000,000  of  paper  money  in 
Europe  and  America  as  well  as  silver  were  demonetized. 
Then  all  the  labor  and  merchandise  of  those  continents 


82  STANDARD    OF    VALUES : 

which  constitute  the  productive  power  and  business  of 
over  three  hundred  millions  of  people  would  produce 
immensely  increased  demands  for  gold  and  greatly  en- 
hance its  value. 

Demand  does  affect  the  values  of  gold  and  silver,  and 
no  one  who  fails  to  put  it  into  the  account  can  escape 
error.  The  demonetization  of  silver  in  the  U.  S.  and 
Europe,  together  with  the  increased  products  of  the 
Nevada  mines,  have  so  reduced  the  demand  for  it  as 
compared  with  the  supply  as  to  produce  a  considerable 
decline  in  its  value  as  compared  with  gold. 

The  proposition  that  the  values  of  the  precious  metals 
are  absolute,  uniform,  remain  nearly  the  same  and  are 
not  affected  by  demand,  but  are  equal  to  the  cost  of  their 
production,  is  triumphantly  asserted  by  a  recent  writer 
of  great  pretensions,  who  so  far  forgets  himself  as  to 
state,  a  few  pages  further  on,  that,  "were  gold  and  sil- 
ver required  to  be  present  in  all  exchanges,  the  amount 
necessary  therefor,  provided  the  volume  of  such  ex- 
changes remained  undiminished,  would  be  more  than 
ten-fold  greater  than  that  in  the  world.  As  they  would 
rise  in  price  from  the  increased  demand,  the  stimulous 
given  to  their  production  would  be  so  great  as  to  in- 
crease their  cost  probably  live-fold." — H.  V.  Poo7^'s 
Money,  its  Laws  and  History. 

Ah  !  here  it  is.  The  increased  demand  luould  raise 
the  price  of  the  precious  metals.  This  is  a  great  truth, 
the  failure  to  see  and  understand  which  has  led,  not  only 
Mr.  Poor,  but  many  other  men  and  governments,  into 
the  gravest  errors,  and  has  caused  the  civilized  nations 
of  the  earth  great  suffering.  According  to  his  hypoth- 
esis the  universal  use  of  gold  and  silver  in  all  commer- 
cial exchanges  would  o;reatlv  increase  the  demand  for 
them  and  enhance  the  value  of  them.     The  corollary 


GOLD    AND    SILVER.  83 

of  tlii.s  must  be  true.  Were  gold  and  silver  excluded 
entirely  from  the  commercial  transactions  of  the  world, 
the  amount  of  them  needed  and  the  demand  for  them 
would  be  greatly  reduced  and  their  values  would,  in 
consequence,  greatly  depreciate.  Therefore,  an  increase 
or  decrease  of  their  uses  and  demand  for  them  will 
increase  or  decrease  their  values.  As,  for  instance,  a 
return  to  specie  paj'ments  by  the  U.  S.  Avill  create  a 
new  demand  for  several  hundred  millions  more  gold 
and  silver,  and  will,  consequently,  enhance  their  values, 
that  is,  their  purchasing  power. 

Gold  and  silver  bullion  is  the  raw  material  out  of 
which  is  manufactured  jew^els,  gildings,  bronze,  watch 
cases,  plate,  etc.,  and  in  that  form  is  simply  a  com- 
modity, and  in  demand  by  only  a  small  part  of  the 
people,  manufacturers,  bankers,  speculators  in  these 
metals,  and  when  government  buy  them  for  coinage, 
then  by  government.  In  the  form  of  jewels,  gildings, 
watch  cases,  plate,  etc.,  they  are  in  demand  by  a  com- 
paratively small  part  of  the  people.  The  values  of  the 
precious  metals  in  all  forms  are  controlled  by  the  de- 
mand for  and  the  supply  of  them  as  compared  with 
the  demand  for  and  supply  of  any  or  all  other  things. 

This  is  a  universal  law  of  values,  and  there  is  no  escape 
from  it ;  but  T)ullionists  attempt  an  escape  by  declaring 
that  gold  and  silver  are  exceptional  and  that  their  values 
are  controlled  exclusively  by  the  cost  of  their  produc- 
tion. If  it  be  true,  as  bullionists  assert,  that  gold  and 
silver  ahvays  have  been  and  are  the  only  true  measure 
of  values,  then  before  they  were  discovered  or  used  as 
measures  there  could  have  been  no  proper  measure  of 
values.  But  some  nomad  in  his  wild  perigrinations  up 
and  do^^^l  the  earth  in  Asia  ^Slinor,  away  back  in  the 


84  STANDARD    OF    VALUES : 

twilight  of  time,  before  commerce  had  become  an  oc- 
cupation of  man,  accidentally  discovered  and  separated 
from  the  sands  an  ounce  of  the  glittering  ore.  What 
did  the  production  cost  him  ?  The  time  was  spent  and 
the  labor  performed  before  the  ore  was  secured.  There 
was  no  measure  of  values.  How  shall  the  cost  of  that 
production  be  measured  ?  If  it  be  said  that  it  cost  one 
day's  work  and  that  one  day's  work  was  the  value  of 
that  ore,  then  the  value  of  the  two  pound  nugget  se- 
cured in  California  in  one  day  was  worth  but  one  day's 
work.  If  it  be  said  that  the  cost  of  the  first  production 
was  the  worth  of  the  thing  produced,  then  what  man  is 
there  on  the  face  of  the  earth  who  can  tell  what  that 
production  was  worth  or  cost  ?  But  that  is  not  the  way 
cost  of  production  is  estimated.  The  cost  of  producing 
a  thing  is  the  interest  and  wear  and  tear  of  capital  in- 
vested and  outlay  for  labor,  clerks,  foremen,  officers, 
etc.,  employed. 

It  is  well  known  that  from  1850  to  1856,  in  California, 
many  men,  \v\th  an  insignificant  outlay,  in  a  few  months 
amassed  immense  fortunes  in  gold  ore.  An  outlay 
and  the  value  of  labor  perhaps  equaled  $1000,  and  the 
gold  raised  perhaps  equaled  $20,000.  In  such  a  case, 
was  the  $20,000  in  gold  worth  only  the  $1000  cost 
of  its  production?  No  sane  man  would  assert  it.  On 
the  other  hand,  thousands  of  men  exi:)ended  ten  dollars 
for  every  one  dollar  in  gold  produced.  In  such  a  case 
was  the  the  $1  of  gold  produced  worth  the  $10  cost  of 
production  ?  By  no  means.  Thousands  of  others  spent 
thousands  of  money  and  never  produced  a  dollar  of 
gold.  The  expenditures  of  the  latter  cannot  be  taken 
into  the  account  of  cost  of  production,  because  they  are 
only  cost  of  non-production. 


GOLD    AND    SILVER.  85 

It  may  be  contended  that  the  total  cost  of  producing 
every  particle  of  gold  should  be  aggi'cgated,  and  that 
the  sum  would  equal  the  aggi'egate  value  of  the  gold 
products.  This  is  the  merest  conjecture,  and  Avould 
lead  to  a  field  of  speculation  or  calculation  as  boundless 
and  uncertain  in  its  results  as  an  attempt  to  number  the 
stars  or  count  the  waves  of  the  ocean. 

One  hundred  thousand  people  started  to  the  gold 
regions  of  California  in  1849.  In  1860  the  population 
was  about  380,000.  Suppose  that  in  1853,  a  3^ear  of 
heav}'  gold  products,  200,000  people  were  engaged  di- 
rectly and  indirectly  in  producing  gold.  That  is  to  say, 
that  some  were  mining  and  the  others  were  supplying 
the  miners  with  the  necessaries  of  life  and  implements. 

Estimating  the  time  of  these  people  at  $1.50  each 
per  dav,  the  cost  of  emigi-ating  thither  at  $200  each, 
the  capital  of  each  employed  after  arri\'ing  there  at 
$200,  and  interest  and  wear  and  tear  of  it  at  20  per 
cent.,  the  total  products  of  gold  in  that  year  would 
have  cost  $141,600,000.  The  amount  of  gold  produced 
that  year  was  $65,000,000,  not  quite  half  the  cost  of 
production. 

This  estimate  is  little  better  than  guess  work.  But 
any  that  may  be  made  will  be  no  better,  because  it  is 
impossible  to  find  the  aggregate  cost  of  production, 
and  the  onlv  difference  in  estimates  is  the  difference 
in  conjectures.  We  believe  that  the  total  value  of 
time,  labor  and  money  spent  in  gold  hunting  and  pro- 
duction in  California  since  1850,  by  all  who  have  at- 
tempted it,  to  be  much  greater  than  the  total  value  of 
all  the  gold  produced  there  in  the  same  time  ;  perhaps 
double.  "We  also  believe  that  the  total  sum  of  gold 
produced,  in  the  same  time,  by  the  successful  gold  hunt- 


86  STANDARD    OF    VALUES : 

ers  to  be  much  greater  than  the  value  of  the  time,  la- 
bor and  money  spent  and  capital  wasted  in  producing 
it ;  perhaps  quadruple. 

These  beliefs  are  based  on  facts,  but  the  facts  known 
are  not  numerous  or  extensive  enough  to  base  a  theory 
upon.  They  are,  however,  more  worthy  of  acceptance 
than  the  assertion  of  bullionists,  that  ffold  and  silver 
are  worth  exactly  the  cost  of  their  production,  because 
they  not  only  fail  to  establish  their  theory  by  facts, 
but  assert  the  proposition  that  every  dollar  in  gold 
and  silver  produced  costs  its  value  to  produce  it,  which, 
if  true,  would  close  every  gold  mine  in  the  world  in 
thirty  days.  There  is  no  profit  here.  Men  abandon 
unprofitable  employments.  The  hired  miners  get  wages 
for  their  work  it  is  true  ;  but  how  is  it  with  the  owners 
of  leads  and  quartz-mills,  who  do  not  strike  a  blow  and 
yet  live  like  princes  ? 

There  are  millions  of  profit  in  it,  to  the  successful 
operators.  How,  then,  is  the  value  of  the  precious  met- 
als the  same  as  the  cost  of  their  production  ?  It  is  not 
true.  Their  values  are  exacth^  what  the  commercial 
world  makes  them  worth. 

A  rare  painting  may  sell  for  five  thousand  dollars, 
when  the  cost  of  its  production  did  not  exceed  one  thous- 
and. If  it  be  said  that  the  time,  labor  and  money 
spent  in  educating  the  artist  should  be  put  into  the  cal- 
culation, then  we  answer  that  all  the  money  received 
by  him  for  all  the  paintings  produced  by  him,  and  all 
the  money  he  realized  for  imparting  instruction  dur- 
ing his  life,  shoukl  be  put  into  the  other  end  of  the  bal- 
ance, and  if  he  realized  for  all  his  labors  $100,000  more 
than  his  outlay,  this  would  be  actual  profit,  proving 
that  the  taste    and  the    capacity  of  the  people  to  buy 


GOLD    AND    SIL^'ER.  87 

fine  paintinirs,  in  other  words,  the  demand  for  them 
and  the  scarcity  of  them,  had  exalted  their  value  far 
above  the  cost  of  their  production. 

It  cost  man  nothing  to  produce  an  acre  of  unimproved 
land,  because  he  does  not  produce  land,  and  vet  there 
are  millions  of  acres  of  such  land  worth  many  dollars 
an  acre.     The  demand  for  them  creates  price. 

If  it  cost  $5  or  $10  to  produce  a  nuiriret  of  sold 
weiohing  2i)S  grains,  and  it  be  dropped  into  the  bottom 
of  the  sea,  out  of  man's  reach,  it  would  not  be  worth  a 
farthinof,and  vet  the  nufirijet  exists,  and  the  cost  of  its 
production  remains  a  fact. 

Cost  of  production  is  only  one  of  the  many  forces 
which  combine  to  determine  the  values  of  o^old  and 
silver  and  ever}i;hing  else,  and  demand  and  supply  of 
them,  as  compared  with  the  demand  and  supply  of 
everything  else,  are  the  results  of  all  the  forces,  and  de- 
termine their  values. 

It  is  evident  from  all  that  has  been  said  that 
it  is  the  use  of  all  merchantable  things,  gold  and 
silver  included,  which  gives  them  value,  and  the  ex- 
tent of  the  value  is  determined  by  the  demand  and 
supply. 

Should  the  supply  of  gold  and  silver  increase  and 
the  demand  for  them  increase  with  the  supply,  there 
would  be  no  fall  in  their  values  ;  l)ut  if  the  demand  did 
not  keep  pace  with  the  supply  of  them  a  fall  would 
take  place,  regardless  of  the  cost  of  production.  This 
was  exemplified  soon  after  the  Californian  and  Aus- 
tralian mines  began  to  yield  immense  sums. 

The  money  systems  of  Europe  and  America  were  re- 
deemable bank  paper,  and  this  paper  was  greatly  in- 
creased, taking  the  place    of  so    much  coin.     The  uses 


88  STANDARD    OF   VALUES : 

of  gold  and  silver  in  the  arts  did  not  begin  to  increase 
rapidly  until  in  1855. 

The  addition  to  the  stock  of  gold  coin  and  bullion 
in  the  world  was  $480,000,000  from  1850  to  1855  ; 
hence,  its  value  depreciated  between  those  years.  But 
since  1855  the  quantity  used  in  the  arts  has  rapidly  in- 
creased, until  now  as  much  is  consumed  annually  in 
that  way  as  is  produced,  there  is,  therefore,  no  accum- 
ulation of  stock,  Imt  an  increased  demand  for  gold  on 
account  of  the  rapid  increase  of  population,  business, 
and  wealth  in  Europe  and  America  ;  hence,  a  rise  in 
the  value,  purchasing  power,  of  the  precious  metals 
since  1855.  Cost  of  production  of  all  things,  gold  and 
silver  included,  is  only  one  of  the  myriad  of  things 
which  combine  to  fix  and  control  values.  The  soil,  the 
elements,  the  seasons,  all  the  conditions  of  man,  and  all 
property,  war,  peace,  floods  and  famine,  are  forces  ac- 
ting upon  the  values  of  all  things,  including  gold  and 
silver.  These  various  forces  determine  the  uses  and 
supply  of  everything.  They  determine  the  extent  and 
intensity  of  demand  and  the  supply  of  all  things  and 
of  every  one  thing,  and  these  fix  the  respective  values. 

Values  are  only  commercial  relations  of  things  to 
one  another,  expressed  in  money.  It  therefore  results 
that  the  values  of  gold  and  silver  are  not  absolute  ;  that 
they  change  with  time  ;  are  different  in  different  parts 
of  the  world  at  the  same  time  ;  that  their  values  are  not 
controlled  by  the  cost  of  production,  but  by  the  extent  and 
intensity  of  the  demand  for  them,  and  the  supply  of 
them  as  compared  with  the  demand  and  supply  of 
everything  else.  They  are  not,  therefore,  and  never 
can  be,  an  unvarying  or  uniform  standard  of  values, 
because,  unlike   a   fixed    measure    or    standard,    their 


TAPER    MONEY.  89 

measuring    or    purchasing    capacities    are    constantly 
chanidns:. 

PAPER   MOXEY. 

Some  hold  that  redeemable  bank  paper,  and  some 
that  all  kinds  of  paper  money,  are  symbolic,  representing 
merchandise  ;  that  so  long  as  they  are  symbolic  they 
represent  merchandise  and  will  be  on  a  par  A\ith  coin 
and  Avill  not  affect  prices  ;  that  an  over-issue  of  such 
paper  is  not  symbolic,  does  not  rejjreseut  merchandise, 
and  is  therefore  vicious. 

This  distinction  is  a  meaningless  one.  Paper  money 
no  more  represents  merchandise  than  the  latter  repre- 
sents the  former,  or  than  gold  represents  both. 

In  18()0  there  was  about  $200,()00,0()()  of  redeemable 
bank  paper  in  the  U.  S.  and  about  $12,000,000,000  of 
proijerty.  How  much  of  the  latter  and  what  part  of  it 
did  the  former  represent  ? 

It  is  true  that  the  circulation  of  money,  sold  and 
silver  as  well  as  paper,  indicates  the  existence  of  prop- 
erty, but  it  does  not  represent  property. 

All  money,  including  paper,  is  an  absolute  distinct 
element  of  power  acting  upon  values.  Money  and 
property  are  opposing  forces,  constantly  asserting  them- 
selves agamst  each  other,  out  of  which  action  springs 
money  prices.  As,  for  instance,  when  money  is  scarce 
it  is  dear,  and  being  dear  forces  prices  down,  and,  on 
the  other  hand,  when  any  kind  of  property  is  scarce, 
as  for  instance  Avheat,  it  forces  down  the  value  of  money 
with  reference  to  itself. 

Two  opposing  forces  cannot  represent  each  other ; 
therefore  money,  i)aper  or  coin,  does  not  represent 
merchandise.  The  error  involved  in  the  proposition 
that  bank  paper  is  symbolic,  representing  merchandise, 


90  STANDARD    OF    VALUES  : 

is  further   illustrated  by   the    habits  of  banks..     Sup- 
pose  the    only    money   in    circulation   in    the    U.    S. 
was  bank  paper  based  on  and  redeemable  in  coin  exclu- 
sively ;  that  all  the  coin  in  the   country  amounting  to 
$100,000,000  was  held  by  the  banks  as  reserves  or  re- 
demption funds  ;  that  the  proper  rate  of  issue  would  be 
$3  in  paper  upon  $1  in  coin  ;  that  the  banks  had  issued 
to  the  full  extent  of  that  rule   and  that  there  were 
$300,000,000  of  their  notes  out.     This  would  be  less 
than  half  the  amount  of  money  now  in  the  country ; 
prices  would  fall  very  low.     This  Avould  cause  smaller 
imports  or  larger  exports,  or  ])oth.     This  would  bring 
an  increase  of  coin  by  reason  of  foreign  balances.    The 
general  demand  for  money  in  the  commercial  markets 
would  be  undiminished.     Property  would  be  reduced 
in  amount  by  reason  of  increased  exports  or  diminished 
imports.     The  banks  would  add  to  their  coin  resei^ves, 
as  they  always  do  when  they  can  ;  this  would  be  easily 
dono  on  account  of  the  amount  brought  into  the  country 
by  foreign  balances.     They  would  then  accommodate 
borrowers  more  freely  and  issue,   say,    $100,000,000 
more  of  paper.     Prices  of  property  would  advance  ac- 
cordingly, because  of  the  increased  amount  of  money 
when  there  was  no  increase  in  the  amount  of  property. 
This  advance  of  prices  would  absorb  or  cause  the  use 
of  the  additional  issue  of  paper  money  in  handling  the 
same  or  a  less  number  of  pounds,  articles  and  yards  of 
merchandise  than  before.     It  appears,  therefore,  that 
if  the  $300,000,000  paper  money  were  symbolic,  rep- 
resenting the  nation's  merchandise,  the  $400,000,000 
paper   would   be    equally   symbolic,    representing   the 
nation's  merchandise  ;  because  all  of  it  was  used  in  ex- 
changing the  merchandise.     The  same  process  will  show 


PAPER   MONEY.  91 

that  any  quantity  of  paper  money,  $2,000,000,000  even, 
would  be  sjnnbolic  equally  with  $300,000,000,  because 
the  greater  sum  would  so  enhance  values  of  property  as 
to  require  the  whole  of  the  $2,000,000,000  to  handle  it. 

But  if  paper  money  be  symbolic,  it  would  represent, 
not  only  merchandise,  but  all  property,  real  and  per- 
sonal, and  labor.  In  other  words,  it  would  represent 
every  article  sold  for  money  and  everything  done  for 
money.  Then,  to  be  a  perfect  symbol  or  representa- 
tive, there  should  be  enough  of  it  to  bring  all  the 
powers  of  man  and  all  the  products  of  his  labor  to  a 
remunerative  market ;  enough  to  employ  every  man 
in  the  nation,  as  well  as  to  effect  exchanges  of  all 
property .  This  is  the  true  test  of  the  quantity  of  money 
needed . 

Checks,  drafts  and  bills  of  exchange  are  also  termed 
symbolic  currency,  representing  merchandise.  There 
is  no  truth  in  this  proposition.  They  indicate  four 
things:  money,  property,  debt  and  credit,  but  repre- 
sent only  the  two  latter.  Money  is  the  base  on  which 
they  rest ;  not  merchandise.  For  instance,  a  shipper 
draws  on  his  commission  merchant  for  the  anticipated 
proceeds  of  a  shipment  of  wheat.  Suppose  the  wheat 
should  be  lost  on  the  way,  never  sold,  or  sold  for  half 
or  double  the  amount  of  the  draft.  In  either  case  the 
draft  could  not  represent  the  wheat.  If  honored 
before  the  wheat  were  sold,  it  would  simply  be  a  debt 
of  the  shipper  to  the  commission  merchant,  based  on, 
and  in  anticipation  of,  the  net  proceeds  of  the  sale  of 
the  wheat.  Although  the  shipment  of  wheat  would  be 
the  occasion  of  the  draft,  yet  the  draft  would  never  be 
drawn  or  honored  except  in  view  of,  or  upon,  the 
prospective  net  cash  proceeds  of  the  wheat. 


92  STAJSDARD    OF    VALUES  : 

Again,  suppose  A  ships  100  bushels  of  wheat  in 
April,  when  it  sells  at  $1  per  bushel,  and  draws  on  his 
commission  merchant  for  $95,  and  in  the  fall  he  ships 
100  bushels  more  of  the  same  kind  of  wheat  when  it 
sells  at  fifty  cents  per  bushel,  and  draws  on  his  com- 
mission merchant  for  $45.  Here  the  same  kind  and 
quantity  of  wheat  is  shipped  each  time,  but  the  drafts 
are  for  different  sums  intended  to  cover  sales.  This  case 
shows  very  clearly  that  the  drafts  did  not  represent  the 
kind,  quality  or  quantity  of  merchandise,  but  were  drafts 
upon  anticipated  money  to  be  realized  on  sales. 

The  idea  of  a  symbolic  currency  is  an  erroneous 
deduction  from  the  phenomena  of  commercial  trans- 
actions producing  or  sustaining  credits  and  floating 
absolute  money  of  no  commodity  value  whatever ;  such 
as  Russian  or  United  States  leijal  tenders,  Indian 
wampum,  and  the  like.  These  phenomena  are  founded 
upon  the  fact  that  commerce  imperatively  demands  a 
medium  called  inone}^  to  effect  exchanges.  This 
Diedium  called  mone}^  either  by  common  consent  or  by 
force  of  law,  assumes  a  named  value,  as,  for  instance, 
a  dollar,  and  becomes  the  measure  of  value  and  medium 
of  internal  exchanges.  But  the  named  value,  as  a 
dollar,  of  this  medium,  measure,  or  standard  of  value, 
is  only  nominal.  It  does  not  express  the  exchange  or 
commercial  value  of  the  money  at  all.  The  latter  is 
purely  relative  ;  the  former  ideal,  nominal. 

The  quantity  of  money  bears  a  relation  to  the  values 
of  property,  and  vice  versa,  without  any  regard  to  the 
nominal  value  of  the  money  or  the  commodity  value  of 
the  material  of  which  tlie  money  is  composed.  The 
fact  that  the  named  values  of  money  are  only  nominal, 
not  relative    or   actual,   is   evidenced   by   the  various 


PAPER    MONEY.  93 

chansres  in  the  coinaere  acts  of  all  civilized  nations.  Ef- 
forts  are  constantly  but  unsuccessfully  made  by  legis- 
latures to  make  the  nominal  and  actual  or  exchange 
values  of  money  of  different  nations  and  the  different 
monevs  of  the  same  nation  the  same. 

Suppose  we  had  no  money  in  the  United  States.  The 
necessities  arising  from  trade  would  cause  the  people  to 
adopt  by  tacit  agreement  or  invent  an  exchange  med- 
ium of  cattle,  hides,  salt,  iron,  tobacco,  cotton  or  some 
other  thing.  Suppose  it  to  be  bits  of  paper  of  a  certain 
kind  and  shape.  The  purchasing  power  of  these  bits 
of  paper  would  depend  principally  upon  the  frequency 
and  magnitude  of  exchanges  and  the  supply  of  papers. 
Suppose  it  would  take  one  of  these  bits  of  paper  to  buy 
a  pound  of  cotton,  a  pound  of  sugar,  a  pound  of  soda  ; 
a  thousand  of  them  to  buy  a  horse  ;  three  hundred  of 
them  to  buy  a  cow  ;  one  hundred  of  them  to  buy  a  cas- 
simere  coat — and  so  on.  No  matter  what  number  of 
bits  of  paper  it  might  take  to  buy  any  particular  article, 
the  prices  of  all  articles  and  the  purchasing  power  of 
these  papers  would  so  adjust  themselves  that  the  value 
of  each  would  bear  the  exact  relation  to  the  value  of 
everything  else  that  the  demand  and  supply  of  each 
would  bear  to  the  demand  and  supply  of  all  or  each  of 
the  others.  Just  what  these  relations  would  be  could 
never  be  ascertained  by  abstract  calculation,  because, 
as  has  been  already  stated,  the  soil,  climate,  the  ele- 
ments, and  all  the  conditions  of  man  would  be  forces 
acting  on  property,  money  and  man's  wants  and  pro- 
ductive powers.  But  the  relations  of  the  bits  of  paper 
and  values  of  property  in  them  would  ultimately  and 
continually  adjust  themselves  in  harmony  with  all  these 
other  forces.     Let  these  relations  of  the  bits  of  paper 


94  STANDARD    OF    VALUES : 

to  cotton,  sugar,  horses,  etc.,  be  as  above  supposed  in 
the  U.  S. 

Now,  suppose  that  England  has  only  gold  money, 
and  it  be  called  pounds,  shillings  and  pence,  and  that 
the  relations  of  money  and  values  stand  as  follows : 
1  pound  of  cotton,  6c?. ;  one  pound  of  soda,  5d. ;  1  horse, 
£20,  and  1  cow,  £6.  Now,  suppose  England  and  the 
United  States  should  have  extensive  commercial  rela- 
tions. An  English  importer  would  buy  cotton  in  the 
United  States.  Of  course  he  would  first  set  down 
cotton  as  worth,  say,  Gd.in  England  ;  then  estimate  the 
cost  of  warehousing,  shipping,  customs,  insurance, 
risks  and  profit,  and  if  he  found  all  these  to  equal  2d. 
per  pound,  he  would  pay  in  gold  in  the  United  States  4cZ. 
per  pound  for  cotton .  In  the  United  States ,  one  pound  of 
cotton  has  been  supposed  to  be  worth  one  of  the  bits  of 
paper.  In  other  words,  Ad.  would  be  equal  to  a  pound 
of  cotton,  and  one  bit  of  paper  would  be  equal  to  a 
pound  of  cotton  in  the  United  States.  Things  equal 
to  the  same  thing  are  equal  to  each  other.  Therefore^ 
the4f7.  in  gold  and  the  one  bit  of  paper  would  be  equal 
to  each  other.  With  the  respective  moneys  bearing 
that  relation  to  each  other  and  to  i3roperty  in  the 
United  States,  an  English  exporter  would  take  a  bill  of 
exchange  drawn  on  a  solvent  New  York  house,  to  be 
paid  in  the  bits  of  paper  at  their  value  relative  to  gold  ; 
that  is,  at  one  bit  of  paper  to  Ad.  because  he  could 
either  exchange  it  for  gold  in  New  York  at  Ad.  to  the 
bit  of  paper,  or  buy  w^hatever  he  wanted  with  it  at  that 
rate. 

But  suppose  that  the  relations  of  property  and  paper 
in  the  United  States  should  become  different  by  reason 
of  a  large  increase  in  the  number  of  the  bits  of  paper^ 


PAPER    MONEY.  95 

SO  that  it  required  two  bits  of  paper  to  purchase  a  pound 
of  cotton.  In  that  case,  gold  would  advance  in  the 
United  States,  and  less,  perhaps,  only  2d.,  would  equal 
one  bit  of  paper ;  showing  a  decline  of  100  per  c(nit.  in 
the  value  ;  i.  e.,  purchasing  power  of  the  bits  of  paper 
as  compared  with  gold.  But  suppose  that  at  the  same 
time  England  should  establish  banks  and  take  her  gold 
as  reserves,  and  upon  it  issue  about  twice  or  thrice  as 
much  paper,  redeenia])le  in  gold,  as  she  had  gold.  In 
such  a  case  the  English  paper  would  be  at  par  Avith 
gold  there,  and  on  account  of  the  great  increase  of  it, 
prices  would  rise.  A  pound  of  cotton  would  be  worth 
in  England,  say,  12(7.  ;  costs  of  warehousing,  shipping, 
insurance  and  profits  on  a  pound  of  cotton,  to  be  shipped 
from  the  United  States,  Avould  be  about  double  what 
they  were  before  ;  say,  about  Ad.  Then  the  English 
importer  could  pay  8cZ.  per  pound  for  cotton  in  the 
United  States,  where  it  would  be  worth  two  bits  of 
paper.  In  such  a  case,  4(7.  in  gold  would  still  be  worth 
one  bit  of  paper,  as  in  the  first  supposed  case. 

Now,  instead  of  calling  the  money  of  the  United 
States  bits  of  paper,  go  back  over  these  supposed  cases 
and  substitute  five-cent  pieces,  of  absolute  irredeemable 
United  States  notes,  and  the  causes  and  the  methods  of 
all  lands  of  mone3'"s'  assuming  and  changing  values  and 
being  at  Avhat  is  termed  par  or  discount,  will  appear 
clear.  We  conclude  therefore  that  paper  money  is  not 
symbolic  ;  does  not  represent  property,  but  is  simply  a 
power,  measuring  values  and  effecting  exchanges  ;  that 
its  values  are  acted  upon,  affected  and  changed  by 
property  ;  that  property  and  money  are  opposing  forces, 
acting  upon  each  other,  and  that  from  the  two  thus 
acting  arise  the  phenomena  of  prices  ;  that  these  prices 


96  STANDARD    OF    VALUES : 

are  determined  by  the  comparative  quantities  of  money 
and  property  as  affected  by  the  many  other  forces  herein- 
before referred  to  ;  such  as  war,  famine,  floods,  man's 
conditions,  etc.,  and  that  sucli  a  thinsc  as  a  uniform 
standard  of  values  over  the  earth  is  an  utter  impossi- 
bility. 

The  foreffoina'  illustrates,  and  the  financial  and  com- 
mercial  histories  of  nations  demonstrate,  that  a  people 
will  use  all  the  money  they  can  get,  and  that  the  prop- 
erty and  business  of  a  nation  will  call  into  requisition, 
or  float,  any  quantity  of  money  whatever,  with  the 
values,  ^.  e.,  exchange  or  purchasing  power,  of  both 
mone}^  and  property,  determined  by  the  respective 
quantities  of  either,  as  modified  or  affected  by  the  other 
forces  heretofore  referred  to. 

As  has  been  stated,  from  a  quantity  of  money  and 
property  acting  upon  each  other  arise  prices;  i.  e., 
purchasing  or  exchange  power  of  both.  A  given  quan- 
titv  of  money  acting  upon  a  given  quantit}^  of  property 
will  produce  in  a  nation  certain  prices  or  values  of 
property.  As,  for  illustration,  $1,000,000,000  of 
monev  and  4,000,000,000  m  quantity  of  jDroperty  would 
produce,  say  |!lO,000,000,000  values  in  the  United 
States.  This  particular  valuation  arising  upon  a  given 
amount  of  money  and  property,  in  a  nation,  would  be 
partly  determined  ])y  the  soil,  climate,  and  all  the  con- 
ditions and  peculiarities  of  man  and  the  count^3^  It 
might  require  a  greater  or  less  amount  of  money  acting 
upon  the  same  quantity  of  property  in  England,  France, 
Germany  or  Kussia  to  produce  money  values  of  the 
property  equal  to  those  in  the  United  States  of  America. 
But  some  amount,  an  unknown  quantity  of  money,  act- 
ing on  4,000,000,000  iu  quantity  of  property  in  the 


PAPER    MONEY.  97 

European  states  would  produce  $10,000,000,000  in 
value.  Suppose  in  England  that  quantity  of  money  to 
be  $800, 000, 000.  Then  the  proportion  of  money  to 
property  in  the  United  States  to  produce  values  to  the 
amount  of  $10,000,000,000  would  be  $1  to  #4  and  in 
England,  $r'ff  to  ^4.  So  long  as  the  conditions  of 
these  two  nations,  and  the  same  ratio  of  money  to 
property  in  each  might  remain  unchanged,  so  long 
would  the  values  of  property  in  both  nations  be  the 
same.  So  soon,  however,  as  the  conditions  of  either 
nation  changed  materially,  or  the  ratio  of  money  to 
property  changed  in  one  without  a  corresponding  change 
in  the  other,  prices  of  jiroperty  in  the  two  nations 
would  loose  their  equilibrium.  As,  for  instance,  war, 
famine,  floods,  or  great  foreign  balances  against  either, 
or  a  change  in  the  amount  of  money  or  property,  would 
quickly  change  prices  in  the  affected  nation. 

The  reason  why  values  in  the  U.  S.  in  1866  were  so 
much  above  those  of  Europe  was  because  the  ratio  of 
mone}^  to  property  in  the  U.S.  was  so  much  greater 
than  in  Europe. 

Banking  with  coin  on  redeemable  paper  without  re- 
ffardine:  this  law  of  values  has  brought  banks  and  whole 
nations  to  srief ,  and  from  the  phenomena  arising  from 
want  of  observance  of  this  law  has  been  deduced  the 
false  idea  of  a  symbolic  currency. 

Suppose  that  the  entire  circulating  money  of  the  U. 
S.  was  redeemable  bank  paper  based  on  $100,000,000 
of  gold  held  as  reserves  by  the  banks,  and  that  the 
volume  of  that  paper  was  $400,000,000  ;  and  suppose 
that  the  respective  relations  of  money  to  property,  and 
conditions  in  England  and  the  U.  S.  be  such  as  to  pro- 
duce an  equilibrium  of  prices.     So  long  as  this  condi- 


98  STANDARD    OF    VALUES : 

tion  of  things  remained  there  would  be  little  inducement 
for  foreio^n  commerce  to  be  anvthins;  but  barter.  No 
balances  would  occur  asrainst  either  nation  sufficient  to 
disturb  either  the  money  or  produce  markets.  But 
suppose  a  spirit  of  enterprise  should  take  hold  of  the 
people  of  the  U.  S.,  and  that  they  should  go  extensively 
into  railroad  building;  and  should  induce  the  banks  to 
trench  upon  the  bounds  of  safety  by  issuing  and  loaning 
$100,000,000  more  of  paper  money  redeemable  in  gold. 
This  additional  issue  would  greatly  enhance  values  in 
the  U.S  .,  but  thev  would  be  coin  values  because  all  the 
paper  would  be  redeemable  in  coin — paper  would  be  at 
par.  This  rise  in  prices  in  paper  at  par  in  the  U.  S. 
would  induce  increased  imports  of  goods  from  England, 
for  profit,  because  of  the  higher  prices  here,  these  being 
coin  prices.  This  would  call  for  shipments  of  coin  to  meet 
the  balances  of  trade  thus  produced  against  the  U.  S. 

The  banks  would  be  called  on  for  coin,  and  their  re- 
serves and  outstanding  issues  would  be  reduced,  pro- 
ducing a  heavy  decline  in  prices  and,  perhaps,  a  panic. 
The  process  of  reducing  the  outstanding  volume  of 
money  would  continue  until  confidence  became  restored, 
and  this  would  take  place  so  soon  as  the  unusual  demand 
for  coin  to  ship  abroad  might  cease  and  the  banks  could 
redeem  all  notes  presented  to  them  for  redemption. 
This  would  bring  the  quantity  of  money  to  a  smaller 
volume  than  before  the  panic,  and  keep  it  so  until  the 
banks  might  increase  their  reserves  or  again  trench  upon 
the  law  of  issues,  and  then  another  inflation  and  another 
panic  would  follow. 

This  gives  no  firrounds  whatever  for  calling  bank  notes 
and  drafts,  bills  of  exchange,  etc.,  symbolic  money 
representing  merchandise . 


PAPEK    MONEY.  99 

It  proves  three  things  :  1st.  A  people  will  use  all 
the  money  they  can  get.  2nd.  When  the  ratio  of 
money  to  property  in  one  nation  is  considerably  above 
that  of  other  nations,  by  the  issuance  of  bank  paper 
redeemable  in  coin,  this  inflates  the  co/n  prices  of  prop- 
erty in  the  nation  so  increasing  its  monc}'.  3d.  This 
inflation  of  coin  prices  induces  large  imports  from  for- 
eign nations  having  smaller  amounts  of  money  and  lower 
prices,  and  this  in  turn  causes  foreign  balances  against 
the  importing  nation  and  large  shipments  of  coin  out  of 
it,  causing  a  depletion  of  bank  reserves,  a  reduction  of 
the  volume  of  money,  falling  markets  and  generally 
panics,  bankruptcies,  and  distress. 

These  evils  result,  not  from  the  quantity  of  paper 
money  nor  because  it  or  any  part  of  it  is  symbolic,  but 
from  the  hind  of  paper,  the  system  of  the  money. 

Now%  suppose  this  money  of  the  United  States  had 
not  been  redeemable  bank  notes,  but  had  been  an  ab- 
solute legal  tender  irredeemable  currency  ;  when  there 
Avas  $400,000,000  of  it  prices  m  the  U.  S.  and  England 
had  been  the  same  ;  but  the  U.  S.  issued  $400,000,000 
more  of  this  paper,  and  the  paper  prices  of  merchandise 
here  had  advanced  above  English  prices,  would  this 
have  induced  larger  imports,  caused  a  flow  of  coin  out 
to  foot  balances  and  brought  depression  in  business, 
falling  prices  and  distress?  No.  It  would  be  impos- 
sible for  an  increased  issue  of  such  paper  to  produce 
such  results,  because  this  paper  would  not  be  redeem- 
able in  coin;  prices  would  not  be  coin  prices^  but  only 
paper  prices,  because  the  paper  would  not  represent 
coin  ;  coin  would  rise  to  a  premium,  coin  prices  of  prop- 
erty would  be  but  slightly  affected,  if  at  all,  and  there 
would  be  no  more,  or  but  very  little  more,  profit  on 


100  STANDARD    OF    VALUES : 

imports  or  loss  on  exports,  than  if  prices  in  the  U.  S. 
and  England  were  the  same. 

This  is  well  illustrated  by  our  commerce  from  1865 
to  1873.  In  1865  and  1866  there  was  a  thousand  mil- 
lions more  money  in  the  U.  S.  than  in  subsequent  years. 
None  of  it  represented  coin.  A  great  part  of  it  was 
legal  tender,  and  the  National  bank  notes  were  re- 
deemable in  legal  tenders .  Notwithstanding  the  greater 
amount  of  money  in  1865-66  than  from  1868  to  1873, 
the  foreign  balances  ao;ainst  the  U.  S.  from  1868  to  1873 
averaged  several  millions  greater  per  annum  than  for 
the  years  1865-66. 

One  of  the  important  differences  between  such  a 
paper  and  redeemable  bank  notes  is,  that  while  a  con- 
siderable increase  of  either  would  give  a  great  impulse 
to  production  and  vitalize  all  business,  the  former  would 
not  itself  produce  a  revulsion  and  consequent  distress 
as  the  latter  would,  but  would,  so  long  as  its  volume 
continued  undiminished,  continue  to  sustain  and  vitalize 
the  productive  and  commercial  interests  of  society.  It 
would  be  free  from  any  depressing  effects  caused  by 
foreign  panics  or  movements  of  coin  abroad.  In  fact, 
a  destructive  money  crisis,  such  as  this  country  has  fre- 
quently suffered  from,  would  be  utterly  impossible  with 
such  a  money  undiminished  in  volume,  so  long  as  con- 
fidence remained  strong  in  the  government  issuing  it. 
Commercial  crises  might  be  produced  by  war,  famine 
or  flood,  but  such  crises  from  such  causes  are  common 
to  all  countries,  and  no  law,  no  money,  no  matter  what 
kind,  can  prevent  them. 

The  difference  in  the  values  of  the  different  kinds  of 
paper  money  in  any  nation  depend  upon :  1st,  the 
difference  in  the  uses  to  which  they  can  be  applied  and 


PAPER    MONEY.  101 

the  supply  of  them,     2d,  The  difference  of  the  public 
confidence  in  the  different  kinds  of  paper  money. 

The  difference  m  the  values  of  coin  and  paper  in 
any  nation  depends  upon:  1st,  The  difference  in  the 
uses  to  which  they  can  be  applied  and  the  supply  of 
them.  2d,  The  difference  of  the  public  confidence  in 
the  coin  and  paper.  Exactly  the  same  laws  of  differ- 
ence exist  between  coin  and  paper  as  between  the  dif- 
ferent kinds  of  paper.  The  same  is  true  of  differeiit 
coins. 

The  difference  in  the  values  of  money  of  different 
nations  is  the  difference  in  their  purchasing  power  over 
the  same  articles  at  home. 

From  the  foregoing  reasons  it  appears  that,  if  the 
ratio  of  money  to  cjuantity  of  property  and  the  con- 
ditions of  all  nations  were  the  same,  there  would  be  an 
equilil)rium  of  values  ;  and  that  whenever  such  equil- 
ibrium of  values  is  broken,  there  can  l)e  no  uniform 
standard  of  values,  because  such  want  of  equilibrium 
at  once  changes  the  value,  the  purchasing  power,  the 
standard,  the  measuring  capacity  of  the  money  over 
propert}'  in  the  nation  Avhere  the  equilibrium  is  broken. 

The  conditions  and  ratio  of  money  to  property  of 
every  nation  alwavs  have  differed  and  alwavs  will  differ 
from  those  of  every  other  nation.  Therefore,  a  uniform 
measure  or  standard  of  money  values  is  just  as  utterly 
unattainable,  as  impossible,  as  it  is  to  make  the  condi- 
tions and  ratio  of  money  to  property  of  every  nation 
alike. 

In  every  nation  whose  money  is  irold  and  silver  there 
must  be  constantly  recurring  inflations  and  depressions 
of  prices  of  property,  resulting  from  the  exports  and 
imports  of  the  precious  metals,  caused  by  the  balances 


102  STANDARD    OF    VALUES : 

of  trade  chano-ino-  from  one  nation  to  another.  In 
other  words,  with  coin  as  the  common  money,  an  equi- 
librium of  prices  over  the  civilized  world  can  never  be 
had,  and  the  absence  of  such  an  equilibrium  would 
doom  the  nations  of  the  earth  to  recurring  financial 
crises  in  the  midst  of  every  period  of  unusual  pros- 
perity, because  their  prosperity  and  increase  of  money 
would  diminish  the  supply  of  money  of  other  nations 
using  coin,  reduce  prices  in  such  nations,  cause  larger 
imports  to  or  smaller  exjDorts  from  the  prosperous 
nation.  Thence  would  flow  heavy  exports  of  coin  from 
the  prosperous  nation,  bringing  a  reduction  of  its  vol- 
ume of  money,  a  fall  of  prices,  depresssion  and  loss 
in  business,  and  a  crisis. 

These  periods  of  financial  prosperity  and  disaster 
would  chase  each  x)ther  around  the  earth  in  endless 
succession,  forever  seeking,  but  never  being  able  to 
effect  an  equilibriam  of  values. 

What  has  been  said  of  coin  money  applies  with 
double  force  to  all  systems  of  paper  money  redeem- 
able in  coin,  because,  an  increase  of  coin  in  the  country 
will  cause  increased  issues  of  the  redeemable  bank 
paper,  and  when  the  period  of  reverse  approaches  and 
coin  is  shipped  abroad  in  large  quantities,  the  revul- 
sion is  intensified  by  the  great  reduction  of  the  volume 
of  paper  money  necessarily  following  a  reduction  of 
the  amount  of  coin  in  the  country.  Thence  folloAvs 
falling  markets,  depression  in  business,  and  frequently 
failures  of  banks,  immense  losses  among  the  financier- 
ing and  commercial  classes,  and  their  effects  quickly 
distress  the  industrial  and  laboring  classes,  and  thus 
the  country  is  swept  over  by  a  terrible  financial  crisis. 

All  systems  of  bank  paper  redeemable  in  coin  are 


PAPER    MOXEY.  103 

unsound  in  principle  and  "vncious  ni  practice.  This 
fact  is  established  beyond  dispute  by  the  financial  his- 
tories of  England  and  America.  There  haye  been  ex- 
ceptional cases,  but  they  Mere  only  exceptions.  Coin 
is  mi2:ratory,  constantly  passinij  from  nation  to  nation, 
chanffinff  in  volume,  increasins;  here  and  decreasins: 
there  to-day,  and  to-morrow  decreasin<2:  here  andincreas- 
ino;  there,  alternately  increasins;  and  decreasins:  the 
yolume  of  bank  paper,  bringing  inflations  and  depres- 
sions of  prices  with  every  change  in  the  supply  of  coin. 
Such  systems,  all  of  them,  are  unsound  in  principle, 
because  they  are  subject  to  be  suddenly  and  seriously 
affected  by  the  movements  of  coin,  and  afflict  the  coun- 
try with  financial  and  commercial  disaster  by  their  o^ni 
vicissitudes.  They  are  vicious  in  practice,  because, 
while  they  essay  to  supply  the  nation  with  currency, 
they  do  not,  the}-  cannot  regulate  the  amount  of  issues 
by  the  needs  of  the  nation  but  by  their  reserves,  thus 
disregarding,  from  necessity,  the  priniar}^  law  which 
ought  to  govern  every  S3'^stem  of  money. 

Furthermore,  when  they  do  make  a  laudable  effort 
to  supply  the  money  needs  of  the  country  by  issuing 
largely,  they  violate  the  law  of  issues  and  bring  upon 
themselves  destruction  and  many  times  unjust  accusa- 
tions of  fraud,  and  distress  the  nation  with  the  terrible 
effects  of  a  monetary  crisis. 

Beside  these  eWls  of  banks  of  issue,  there  is  another, 
scarcely  less  objectionable.  It  is  that  such  systems 
place  in  their  hands,  the  hands  of  a  few,  an  immense, 
an  overshadowing  power,  which  can  be,  and  generally 
is,  combined  to  influence  legislatures  and  congresses, 
governors,  presidents,  and  other  functionaries,  upon 
any  fiscal  measure  which  may  arise,  calculated  to  affect 


104  STANDARD    OF    VALUES  ; 

them,  and  such  questions  are  constantly  arising.  They 
thus  become  powers  of  evil,  inducing  government  to 
pass  laws  and  adopt  policies  looking  to  their  special 
interests,  often  regardless  of,  and  not  unfrequently 
directly  against,  the  general  good  of  the  country. 
These  evils  of  banks  of  issue  are  common  to  all  systems 
of  the  kind,  and  a  choice  of  systems,  whether  they  be 
state,  national,  or  free,  or  any  other,  is  only  a  choice 
of  evils. 

The  only  money  which  could,  in  the  nature  of  things, 
be  free  from  the  evils  named,  would  be  an  irredeem- 
able legal  tender  paper,  issued  by  government.  Not- 
withstanding the  abuses  and  denunciations  heaped 
upon  such  a  paper  by  a  certain  class  of  thinkers,  it  is 
the  best,  the  safest  paper  money  ever  invented.  If 
such  a  paper  should  be  issued  by  government,  and  a 
sufficiency  of  it  kept  in  circjilation  to  serve  the  needs 
of  the  people,  a  financial  crisis  would  be  utterly  impos- 
sible, so  long  as  the  volume  of  money  remained  undi- 
minished and  contidence  in  the  stability  of  the  govern- 
ment remained  strong.  If  the  government  should 
become  involved  in  a  great  war  which  threatened  its 
existence  Avith  destruction,  such  a  paper  would  depre- 
ciate accordingly.  But  the  bonds  of  the  nation  would, 
for  the  same  reason,  depreciate  equally  as  much ;  any 
bank  paper  that  might  exist  would,  for  the  same 
reason,  depreciate.  A  financial  crisis  would  be  equally 
certain  and  equally  destructive,  under  such  circum- 
stances, with  any  monetary  system. 

An  irredeemable  legal  tender  paper,  issued  by 
government,  would  give  every  holder  of  any  of  it  a 
pecuniary  interest  in  being  loyal  and  patriotic  that  no 
other  money  would  create.  There  is  not  half  enough  gold 


PAPER    MONEY.  105 

and  silver  in  the  civilized  world  to  serve  its  financial  and 
commercial  needs.  Every  nation  must,  therefore,  supply 
its  people  with  some  other  money,  and  with  each  it  is 
only  a  question  of  kind  and  quantity.  It  is  the  duty  of 
government  to  supply  its  people  with  the  best  possible 
money  and  with  a  sufficient  quantity  of  it  to  put  into 
active  operation  all  the  productive  powers  of  the 
people.  It  is,  then,  the  duty  of  the  Government  of 
the  United  States  to  supply  the  people  with  legal  tender 
paper  in  sufficient  quantity  to  keep  every  willing  brain 
and  hand  profitably  employed. 

Such  would  give  the  country  the  nearest  possible 
uniform  standard  of  values  for  internal  commerce,  and 
this  is  the  standard  which  all  nations  should  be  con- 
cerned about,  because  the  efforts  to  conform  the  value 
of  money  of  one  nation  to  that  of  another  and  to 
secure  a  uniform  measure  of  values  all  over  the  world 
is  a  thing  impossible,  beyond  the  reach  of  legislatures 
and  ffovernilients. 


CHAPTER   III. 


PRICES  OF    PROPERTY    AND    GOLD    PREMIUM  :       CAUSES    OF 
THEIR    RISE    AND    FALL. 

For  the  purposes  of  comparison  we  give  tables  of  the 
amount  of  money  in  circuhition,  prices  of  commodities 
and  gold  premium.  The  table  of  money  embraces  one 
and  two  year  demand  notes  ;  temporary  ten  day  loans  ; 
one  year  certificates  of  indebtedness  ;  sixty  day  and  two 
year  treasury  notes  ;  7-30  three  year  notes  ;  compound 
interest  notes  ;  three  per  cent,  certificates  ;  non-interest 
bearing  notes  and  fractional  currency,  because  they 
circulated  as  money ;  in  fact  a  great  part  of  the  7-30 
notes  and  compound  interest  notes  were  by  law  a  legal 
tender.  Anything  which  is  used  as  a  medium  of  ex- 
change and  performs  the  functions  of  money  is  money 
for  all  the  purposes  necessary  in  the  consideration  of 
this  subject.  Therefore,  we  include  all  the  above  named 
government  paper  in  the  estimates  of  money  outstanding. 

Following  is  a  table  showing  the  kinds  of  money  and 
the  amounts  outstandino;  from  1854  to  1876  inclusive 
as  given  by  Mr.  Fawcctt,  and  of  1877  taken  from  the 
report  of  the  comjitroUer  of  the  currency : 


CAUSES  OF  THEIR  RISE  AND  FALL. 


107 


Year. 

OOQtOCJCtOOOOOCOtJOOODOOWOCiOO<XCClOO»g3DOOgg» 

^Oitn^-cota^o^soo-iosSj^Wbit-^otoa^OJOi*^ 

to 

i-ii-i  i->  t-.  u^  ^s  od'go  *- 

•  «o^o:c;d-x«ooi-'  —  •— "---icD*'!" 

•  *-  *..*.*^  *- 4.4.00OO-I  TCOO-I  ;dm 

.     1^  "-I  .-I  —  I  c;i  i;i  K*  —  —  »— '  ^- »— .  »— t— '  t— t  O' 
■    cn  cn  OI  iji  o  o  c;i  ts  to  bO  LO  to  to  t«  LO  c;i 

Deinana  and    one   and   two 
year    Trea.-^uiy    Notes.    (Acts 
March  2,  1801,  Decenib.  27, 1857, 
December  17,  I860,)  outstand- 
ing July  1. 

107,02^,096 

259,1  OS  327 

233,0.59,191 

205,489,0iil 

147,507  196 

20,261.070 

13,815,029 

198,310 

186,310 

85,370 

83,500 

83,500 

83,500 

8,060, 

8,0001 

*    ;     •    • 

Temporary  ten  day  loans. and 
one  year  certillcates  of  indebt- 
edness, July  1,  each  yeai\ 

l-i  W  to  M  .      . 

.     0.-'t0  4--0  —  J.^mO'lCtnCC^I 

.    _*- W-IJ.i  03iJ_GC-)  Ul  W  *- S—         ; 

•  O-IOO  — J — i^iowo  — en 

•  en  in  OI  iJi  -]  (X  to  to  to  o  o  c  o 

Treasury   Notes    payable    in 
two  year.s,  and   in   sixty  days, 
(Act   March    3,  18B3,)    July  1, 
each  year. 

•  rf*  X  35  —  ,—  MJ 
W  00  0.-I  O  ii  lO 

^  -J  oc  o^  to  X  ep  to 

•  >-•  to  roio  03  4^  «1-t.| -^*:-■iJ,'-^'^-~%*^ 

•  JC  w--ii;jo_o._h-_a5-i-jocc5:  oS 
"    SfiS?=lS' f  S"^'^^*— '-l"x  ^in  in 
• ooooooooo oo oo o o 

7-30  three  year,  July  1,  each 
year. 

to  to  OI  X  >— '  •      • 

;                            JO  JO  00  jO  o  ii  ot  ■    . 

',     CO  oo  .^  *..  OI.-!"— GC"— 'iC  0-l"0  I     I 

•  GOj-iyi  j£i  w  ooio  —  ^4-100:0.    , 
'    ^  w  to'*-'*qi  CI  *:D  4^  V^'*--"o  0  •     ' 

•  ooooooooooooS-    • 

Compound  Interest  Notes  Ju- 
ly 1,  each  year. 

50.000,000 
45, .545, 000  : 
12,220,000  ; 

30,000 ; 

5  000  : 

5  000  ; 

5,000  .' 

••••••••        I. 

3  per  cent.  Certiflcates,  July 
1,  each  year. 

I'  00  -/;  0  0  —  "0  —  1— — '^"x  —  x'x'it 

0  W  4^  -4  -1  .X  X  0  to  *i  --i  i£  0  Si  0  35 
W  X  — __05_!X  00  35  3:  «  —  to  ppic^lB 

CC  to  T.  -1  0  lO  ii  li  -1  ^1  0  ic  In  3-,"lJ<  ^ 

CDC  xos3;oooiioiiE3;35-ixo 
0  ^  -4  to  ~t  35  3:  o^cwcc-axotco 

Non  -  Interest-Bearing,   De- 
mand and  Legal  Tender  Notes, 
(Acts  July  17, 1861.  February  25, 
1802.  July  11,  1862,  and  March  3, 

f%?'^!f-*-'«'*^cowo3iototototo. 
a,  *.  to  oi  *.  p  0  «5  to  to  -4  -4_*.  10  0  : 

P  f^  -; 'if  ■■'"?=  "en 'cr.  'ws-jOo  o":d  o"'-'  • 

4-  t  >«  31  —  &  X  -  1  —  10  iO  .- 1  ^  0  to 

J.^  35  w  j—  X  OIJO  X*.--4  00intf».to; 
2*^  »- tow  X  QOV.'3-.O'^I  CC"CX  OOV  . 

IV  ^  10  0  3; :/;  ^4  X  01  in  10  -1  to  ^1  in  . 

ooi+.;noiOi*.*.^itoo:05tD-iC5- 

Fractional  Currency. 

30, lis 

213,239,-530 
291,093,294 
294,377,390 
294,476,702 
292,833,9.35 
302,028,020 
318,043.841 
3X6,289,287 
i50  020,062 
349.402.8.39 
510  809,136 
320  631,719 

National  Banks. 

Bank  Note  Circu- 
lation Jan.  1,  each 
ar. 

•Z;t~OT^                                            lot-^toto  — —  toh-i-^to 

c;C3  r;  ^  X*P?*r'^<  ■■0  4'      :    35-1  iv  —  cc"i-i-i -c "35 

•^T)---CC -J  ii'Vf  "■?"•*;       •     ^:COOOOO*-0<Q0 
tj  —               ~  -=  ^'  ~»  *-  to  ►-•  -X)        .      ►-  4^  01  10  35  0;  -X  00  to  «5 

v-^^tOij0.x'o'5  0*;V'        ;     TOOOO  000000 

v5-j:OtaOoo35  —  xoi           t—  00000  00  (=0 

^--w  3:  CXO  W  50  W  XOI        ■      0000000000 

State  Banks. 

567,667,758 

1,043,010  415 

9(>8,059.995 

1,651,282.373 

1  803,702,726 

1,330,414,077 

817  199,773 

750,025  989 

740,0.39,179 

7.34  244,774 

736,349,912 

7.38,291,749 

779,031,589 

778,170,2.50 

7.«.358,832 

690,078  729 

0 1 
0  c 

^} 

Jl  c 

S5; 
J  4.^  e 

Hi 

-  tOl-Jl-itO 

Ji  —  coooo 

J'*-01  Ojt- 
r>  ;c  *^  0100 
'■'.'- *j-J^ 

=  0000 

Total  of  Bank  Notes  .in 
funded  GDvernment  Deb 
cu biting   to    any   extent 
year. 

d  un- 

t  Cir- 

each 

108    PRICES  OF  PROPERTY  AND  GOLD  PREMIUM  : 

This  table  exhibits  an  expansion  of  the  volume  of 
money  from  January,  18G2,  to  January,  1866,  at  or 
just  before  which  time  it  reached  its  maximum  ;  its 
contraction  until  1871  ;  a  slight  expansion  then  until 
1874 ;  then  a  contraction  until  in  1877  it  fell  to 
$690,078,399,  and  is  still  diminishing. 

It  is  only  necessary  to  say  that  the  increase  and  de- 
crease of  the  volume  of  currency  as  showni  above  were 
produced  by  legislation  and  the  fiscal  operations  of  the 
government.  First,  laws  Avere  passed  authorizing  the 
issuance  of  the  several  kinds  of  money  enumerated, 
and  they  were  issued  ;  next,  laws  were  passed  provid- 
ing; for  fundins:  all  the  above  named  ojovernment  notes 
and  bonds  except  fractional  currency  and  legal  tenders 
still  outstanding,  and  such  notes  and  bonds  were  taken 
up  by  the  government  and  long  bonds  issued  in  their 
stead.  These  long  bonds  were  not  intended  to  be,  and 
have  not  been  used  as  money.  Then  the  Kesumption 
Act  was  passed  producing  the  contraction  which  has 
taken  place  since  1875.  The  Resumption  Act  is  only 
another  method  of  contracting  the  currency  so  rapidly 
begun  in  18  60,  and  its  effects  on  prices  have  been  and 
will  continue  to  be  the  same  as  that  produced  by  that 
or  any  other  method  of  contraction  under  like  circum- 
stances. 

Before  proceeding  further,  I  note  here  a  seeming 
paradox  in  relation  to  the  effects  of  the  amount  of  a 
nation's  or  the  world's  money  on  prices.  It  is,  how- 
ever, but  seeming,  not  real.  I^he  direct  effect  of  a 
large  volume  of  money  is  always  a  tendency  to  advance 
prices,  but  its  remote  effect  is  to  ultimately  reduce 
prices  of  manufuctui-ed  goods,  or  anything  the  success- 
ful and  abundant  production  of  which  requires  or  admits 


CAUSES  OF  THEIR  RISE  AND  FALL.  109 

the  use  of  skilled  labor  by  the  application  of  machinery. 
Hence,  calicoes  are  cheaper  than  they  were  50  years 
ago.  Freighting  is  cheaper  than  it  was  before  the  con- 
struction of  railroads.  These  are  the  remote  results  of 
large  volumes  of  money  enabling  men  to  successfully 
combine  and  appl}'-  their  powers  and  economize  labor. 
But  this  cheapening  process  does  not  attach  to  fixed 
propert}^  houses,  lands,  etc.,  to  animals,  to  labor,  to 
the  professions  or  fine  arts.  The  correct  statement  of 
this  law  of  prices  is,  that  the  direct  effect  of  a  large 
volume  of  money  is  to  enhance  prices  of  all  property, 
and  its  remote  effect  is  to  ultimately  reduce  prices  of 
all  property,  the  abundant  supply  of  which  depends 
upon  the  use  of  skilled  labor  by  the  application  of 
machinerv  ;  and  that  the  direct  effect  of  a  small  volume 
of  money  is  to  reduce  the  prices  of  all  property,  and  its 
remote  effect  is  to  ultimately  advance  the  prices  of  all 
articles,  the  production  of  which  depends  upon  the  use 
of  skilled  labor  by  the  application  of  machinery.  The 
remote  effects  of  a  small  volume  of  inoney  occur  only 
after  its  direct  effect  has  so  reduced  prices  as  to  ren- 
der production  so  unprofitable  as  to  destroy  or  seriously 
cripple  it,  stop  machinery  and  pauperize  labor. 

Fortables  of  currenc3q3rices  of  gold,  and  wholesale  and 
retail  prices  of  certain  articles,  see  pp.  110,  111  and  112. 

As  Avill  be  seen  in  the  following  pages  the  values  of 
lands  have  greatlj'^  depreciated,  as  well  as  those  of  all 
other  propei'ty. 

Many  other  things  operate  on  the  markets  with  as 
much  force  and  effect  as  money.  But  a  large  volume 
of  money  always  tends  to  elevate  prices,  and  a  small 
volume  tends  to  depreciate  them.  Ample  proof  of 
this  will  be  found  on  a  comparison  of  these  tables. 


110 


PRICES  OF  PROPERTY  AND  GOLD  PREMIUM  .* 


Table  showing  currency  value  of  one  hundred  dollars  in  gold  in 
New  York  market,  by  months,  quarter-years,  half-years,  and  fiscal 
years,  from  January  1st,  18G2,  to  August  31st,  1875,  both  inclusive: 


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CAUSES    OF    THEIR    RISE    AND    FALL. 


Ill 


J    ^^    hH(    ^d    ^^    ta^    1^    •K'    ^H    •«•    ^—    ^—    ^—    r—    •—— 

jocooococxxxocscxxzgcg 

I  ~>1  K^i  K-l  ^-1  ■^  ^-]  w^  ^  w-  V  wi  V-  v*  •; 


«  -4  ti  5  X-lSJOO-'CS-^X^-Q 


S* 
a 
>-t 
a 


o 


OiCT35:i00CiCi-lO  —  XOX^>  C-^ 

*.  ti  X  cj  li  ti  s  £  1 4  i  '.^  r '  £  S  i:  r- 


Wheat, 


l)er  bnshel. 


Flour, 


per  barrel. 


coooco  — —  H-^o  — "-oo-w  I  Com, 


^  O  O  X  W  O  *^__*^  ^'^  O  wT  gi  o  o  o  cs 


per  bushel. 


Uorn  Meal, 

per  barrel. 


="=  t^  =  -"'  2  =;;  £  s?  £  £  2 1  ■  2  '.^  ^ 


Coal, 

per  chaldron. 


Cotton  Middlings, 
per  pound. 


o      I 


kC  M  ic  ■^  1-  i;  t:  *■  ii  *»  3"  ic  ■^  H  >S  .„ 

vciiiays:  —  xsx-^oxtci;  — ^ 
c  o  o  o  o  =  o  o  o  c  o  —  s  —  o  ~ 


Iron,  Pig,  i 

per  ton, 


a 

o 
p. 

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OSOOOCOC  —  —  =  30-i« 


COOCCOCC  =  =  COOO-jt 


Lead,  Pig, 

per  100  pounds. 


Leather,  Sole, 

))er  pound. 

Molasses,  New  Or.,' 
per  gallon.  | 

Molasses,  Foreign, 
per  gallon,  j 


o  5  o  o  oooosoooooo^ 


Pork,  Mess, 

per  barrel. 


Beef,  Mess, 

per  barrel. 


Hams,  Smoked, 
per  pound. 


o  o  o  c  o  o  o  ©  o  o  o  o  c  o  o« 
«  S  X  5;  S  rS  ~  c;  tc  li  V  e  li  —  X  O 

(^  ^  .;-  ^  »-i  i«  -^  ic  O  X  —  *  •'I  X  -^  Ci 

,*fc SI o *-  »  ocj^c;^  —  ■.■■^^t<'0^^ 


Lard. 


per  pound. 


Butter, 


per  pound. 


Cheese, 

per  pound. 


-4  X  -J  -1  X  I",  r:  X  X  —  li  tc  X  M  -i«p 

CO  tc 

ox 


;  O  V  CI  i^  ii  X  X  -I  -I  O^  C  O  . 


Rice, 

per  100  pounds. 


Salt, 


per  bushel. 


Sugar,  New  Orlea., 
per  pound. 


•  OOO  OOOOC  O  C  C  C  O  O-i/i 

*  cooo«  —  —  —  o  —  'rrr5£., 
oocooooc  —  cscsoo-s 
ct  ci  v»  *  c:  i;i  VI  c  V"  VI  ^1  —  X  *  ■;*■ 

tOOCV'OWWOw'COS'Ol^-JCS 


Sugar,  Foreign, 

per  pound. 

Wool, 

per  pound. 


o 


C-4 

o 


P-t5 


o 
O 


o 
o 


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^       a 


Q 
•73 

P 
1— • 

3. 
o* 
® 

03 


o 


to 


112 


PRICES  OF  PROPERTY  AND  GOLD  PREMIUM 


Table  of  aggregate  prices  of  provisions,  groceries, 
etc.,  in  the  towns  of  the  United  States  for  the  years 
1867  and  1874,  {Labor  in  Eurojje  and  America,  page 
810). 


PKOVISIOXS 

18G7 

rioiir,  sprfine.bbl  $12  'JO 

Fl  ;ur,  fxtmily  " 

13  G6 

Flour,  ryi? " 

11  33 

Corn  meal " 

8  07 

Beef,frsli,rost  .lb 

16 

Beef,    "    soup  " 

11 

Beef,     "   steak  " 

17 

Beef,    corned  .  " 

14 

Veal,  fquartrs.  " 

14 

Veal,bqaartrs.  " 

16 

Veal    cutlets..  " 

ISi 

Muton,  fqrtr..  " 

13i 

Mutton   leg.. .  " 

15 

Mutton  chops..  " 

161 

Pork, fre>h....  " 

17 

Pork,  corned..  " 

201 

Pork,  buc'U..  -  " 

22 

Pork,  hams " 

26^ 

Pork, shoulders  " 

21| 

Pork,  sausages  " 

24i 

Lard * 

24i 

Codfish,  dry...  " 

17i 

Mackerel,  pkld  " 

20J 

Butter " 

4'.)i 

Cheese " 

29 

Potatoes bus 

1   62i 

Rice lb 

1711 

Beans qt 

16i 

Milk '• 

12 

Eggs doz 

49 

1874    I  GROCERIES 

$6  83    Tea,  black lb 

7  93  Coffee,  greenl.  " 
6  24  Coffee,  ro'std.  " 
5  24    Sugar   brown   " 

IH  Sugar,  vel  'C.  " 

08 J  '^ugar,  cof.  B'  " 

13^  Molasses,  NO. gal 

10^  Molasses.  P.R.  " 

Hi  Syrup " 

13;^  ^oap,  common  lb 

15|  Starch " 

llj  Fuel,    coal ton 

14  Fuel.  wood.. . .cord 

15  Fuel,    pine.. ..  " 
14    Oil,  coal gal 

14i  DOMESTIC  DRY  GOODS 

15^  Shirtings yd 

17.i  sheetings " 

14'  Cotton  flannel.  " 

16i  Tickings «■ 

17^  Prints " 

11    Muslin  delains  '* 

13^  Satinets " 

35|  Boots,  men's  ..pr 

22i        HOUSE-KENT 

99i  Four  rooms... mth   14  92 
11; 


1867 

1874 

1  60 

99 

31i 

28i 

43 

34J 

20i 

llj 

20  i 

12 

22 

131 

1   57 

98 

1  43 

84 

1  soi 

1  08i 

16 

09i 

22 

13i 

10  83 

9  11 

5  71 

5  30 

5  00 

5  42 

1  20 

38J 

231 

12| 

34 

20 

354 

19| 

45^ 

27i 

18i 

I0| 

31i 

23^ 

96| 

73i 

6  22 

5  05 

14  92 

11  93 

22  09 

16  27 

6  79 

5  01 

6  06 

3  53 

■six  rooms. ..." 

10|  BOARD 

0!tj  Mechanics wk 

30  'Factory  women  " 

[Since  187-4  there  has  been  a  heavy  decline  in  all 
these  articles.] 

The  tables  show  a  larger  volame  of  money  in  1863 
than  in  1864,  but  prices  of  gold  and  other  articles  were 
about  33  per  cent,  higher  in  the  latter  3'^ear  than  in  the 
former.  It  is  evident  that  the  cause  of  the  rise  in 
prices  here  was  other  than  the  size  of  the  volume  of 
money.  We  find  the  volume  of  money  in  1864  only 
-i^  of  the  volume  in  18(55,  and  yet  ijold  averasfcd  a 
third  hiojher  and  merchandise  a  third  lower  in   1864 


CAUSES  OF  THEIR  RISE  AXD  FALL.  113 

than  in  1865.  Airain,  the  volume  of  money  in  Jan- 
uary,  18()(3  was  about  $150,000,000  greater  than  in 
January,  1S()5,  and  yet  prices  of  the  greater  part  of 
commodities  were  25  per  cent.,  and  gokl  seyenteen 
per  cent,  lower  in  January,  18G6,  than  in  January  of 
the  former  year. 

In  January,  18()7,  the  yolume  of  money  was  $470, 
000,000  less  than  in  January,  1866,  and  yet  gold  was 
but  three  per  cent,  lower  on  an  average  during  1867 
than  in  1866,  and  a  number  of  articles  advanced,  while 
others  fell.  In  January,  1868,  the  volume  of  money 
was  $513,000,000  less  than  in  January,  1867,  and  yet 
gold  was  on  an  average  one  per  cent,  higher,  and  there 
was  a  slight  decrease  in  the  value  of  commodities. 
In  January,  1869,  the  volume  of  money  Avas  $67,000, 
000  less  than  in  January,  1868  :  irold  fell  on  an  averasce 
seven  per  cent.,  and  commodities  fell  slightl^^  In 
January,  1870,  the  volume  of  money  was  $10,000,000 
less  than  in  January,  1869,  and  o-old  fell  on  an  average 
eighteen  per  cent.,  and  commodities  fell  in  less  propor- 
tion. In  January,  1871,  the  volume  of  money  was 
further  reduced  a  few  millions,  commodities  fell,  but 
fjold  advanced  slio-htly. 

-This  suffices  to  show,  that,  while  the  volume  of 
money  and  prices  bear  some  proportion  to  each  other, 
yet  the  effects  of  the  one  on  the  other  are  greatly 
moditied  by  other  powers.  The  other  forces  which 
affect  prices  and  the  purchasing  power  of  money  are 
war,  peace,  failure  of  crops,  or  other  great  general 
calamity,  abundant  crops,  supply  and  demand,  faith  in 
the  government,  faith  in  the  currency  of  the  paper, 
credit — all  the  conditions  of  man. 

It  will  be  observed  that  the  rise  and  fall  of  gold  was 


114    PRICES  OF  PROPERTY  AND  GOLD  PREMIUM  : 

out  of  all  proportion  to  the  increasing  or  decreasing 
volume  of  paper  money,  so  much  so,  that  we  are 
forced  to  the  conclusion  that  greater  forces  than  the 
volume  of  paper  were  operating  on  the  gold  market. 
Or,  if  you  please,  greater  powers  than  gold  were  oper- 
ating on  the  value  of  paper.  Thus,  we  see,  that  in 
July  and  August,  1864,  a  dollar  in  gold  was  worth 
more  than  two-and-a-half  dollars  in  paper,  when  there 
were  but  $968,059,995  of  paper  in  circulation.  This 
was  when  victory  perched  upon  the  Confederate  ban- 
ners. AVhile  in  the  same  months  of  1865,  a  dollar  in 
gold  was  worth  but  $1.43  in  paper,  when  there  were 
$1,651,282,373  of  paper  money  in  circulation.  This 
was  soon  after  the  Confederates  had  surrendered.  Here 
gold  fell  nearlv  one-half  simultaneous! v  with  a  two- 
thirds  increase  of  the  currency  and-  an  advance  of  the 
price  of  commodities  about  one-third  or  fourth. 

It  will  be  observed  that  the  fall  of  gold  from  1869 
to  1870  was  eighteen  per  cent.,  when  the  currency  was 
reduced  but  ten  millions.  This  fall  of  irold,  the  sfreat- 
est  in  any  one  year  since  1865,  is  not  attributable  to 
the  small  decrease  of  the  currency,  but  mainly  to  the 
decision  of  the  Supreme  Court  of  the  U.  S.  adjudg- 
ing "  Greenbacks"  a  legal  tender  for  all  debts  created 
before  as  well  as  after  the  passage  of  the  legal  tender 
act.  An  examination  of  these  tables  reveals  the  indis- 
putable fact,  tliat  the  war  and  want  of  faith  in  the 
stability  of  the  government  were  the  potent  causes  of 
the  great  depreciation  of  jjaper  money  during  the  war 
period.  Exactly  the  same  causes  produced  the  great 
depreciation  of  the  French  Assignats  during  the  revo- 
lution of  1789  and  onward. 

Other  causes  which  aided  in  sustaining  the  gold  pre- 


CAUSES  OF  THEIR  RISE  AND  FALL.  115 

mium  in  the  U.  S.  after  war,  were  the  ceaseless  poli- 
tical and  local  broils,  riots  and  disturbances  in  the 
South.  Two  other  powerful  causes  have  constantly 
operated  on  the  gold  market  ;  they  are  our  foreign 
commerce  and  foreign  interest.  Following  is  subjoined 
a  table  of  the  exportations  and  importations  of  mer- 
chandise, (excluding  gold  and  silver),  from  June,  1863 
to  1877  inclusive,  and  the  balances  against  and  in 
favor  of  the  U.  S. 

Tear.  Imports.  Exports.  ^^'?heV'!f.''"'* 

1863..  $243.335  815 $203  961,447 $  39,371  368 

1864...  316.447  283 158,837.988 157,109  275 

1865...  238  745  580 166  029  303......  27.716  177 

1866...  434  812,066 348  859  522 85,952,544 

1967...  395,763,100 292  361225 103  401,875 

1868...  357,436  440 201952  899 75,584.541 

1869...  417  506  379 286  117,697 131.388  682 

1870...  435.958  408  392  771.768 43.176  640 

1871...  520  223  684 442  820,178 87  403,506 

1872...  626  595.077 444.177.586 182  417  491 

1873...  642,136,210 522.479.922 119  656  288 

Balance  in  favor 
U.  S. 

1874...  567,406,342 646  856  926 39  450  584 

1875...  535  005.336 579  367,543 44.362,207 

1876...  460,741,190 519.114,630 158.373  440 

1877...  451.323,126 589  670,224 138,357,098 

All  foreign  imports  re-exported  are  excluded  for 
1876-7. 

We  here  give  the  exjjorts  and  imports  of  gold  and 
silver  and  the  excess  of  exjiorts  over  imports  for  each 
year  from  1863  to  1877  inclusive.  Also  the  average 
gold  premium  for  each  of  the  years  named  : 


116    PRICES  OF  PROPERTY  AND  GOLD  PREMIUM  ! 

Average 
Tear.  Exports.  Imports.  ^-^ilJo^^Js^.'"*^    ^o'"  \- 

Tenders 

1863....$  64,100,000..$  8,500,000.  .$55,600,000 $145 

1864 105,300.000..    13,100,000..   9^.200  000....   2.03 

1865 67.600000..     9,800,000. .   57,800,000. .. .    1.57 

1866....     86,000,000..   10,700,000..   75,300.000....    1.40 

1867 60.800,000..   22.000,000..   38,8  J0,000. . ..    1.38 

1868 93.700,000..    14,100,000..    79.6;J<),000 1.40 

1869 57,100,000..    19,800,000..   37,300,000 1.33 

187) 58  100,000..   26,400,000..   31,700,000 1.15 

1871 98,400,000..   21.200,000..   77.200,000....    1.12 

1872 79'800,000..    13,700,000..   66,100,000 1.12 

1873 84.600,000..   21,400,000..   63,200,000 1.14 

1874 59,600,000..   28.400,000..   31,2  i0,000 1.11 

1875....     73,800,000..    18  900,0u0. .  54  9  tO,000. . .. 

1876 56,5.6,3u2..    15,936,681..    4ii,569,621 

1877 15  387,823.... 

It  will  be  seen  from  the  table  of  exports,  that  up  to 
1874,  large  balances  for  merchandise  accrued  against  the 
United  States,  and  for  1872  and  1873,  these  foreign  bal- 
ances against  the  United  States  amounted  to  the  enormous 
sums  of  $182,000,000  and  $119,000,000  respectively. 
These  balances  account  in  part  for  the  gold  premium  not 
falling  in  1872  and  for  its  advance  in  1873.  A  com- 
parison of  the  two  tables  shows  an  advance  in  the  gold 
premium  with  every  increase  of  the  exports  of  coin 
except  for  the  years  186G  and  1871.  The  reason  for 
these  exceptions  is  found  in  the  fact  that,  including 
gold  and  silver  shipments,  there  were  no  balances 
worth  naming  left  against  the  United  States.  The 
table  also  shows  a  corresponding  fall  in  the  gold  pre- 
mium with  every  annual  decrease  of  exportation  of  the 
precious  metals,  except  for  1872  and  1873,  and  these 
exceptions  are  founded  in  the  fact  that,  after  deducting 


CAUSES  OF  THEIR    RISE    AND    FALL.  117 

all  the  ex]3oii:s  of  both  merchandise  and  gold  and  silver, 
there  remained  enormous  balances  against  the  country. 
These  comparisons  of  tables  must  sutiice.  The  reader 
may  extend  thcni  at  leisure.  It  is  e\'ident,  from  these 
exhibits,  and  from  what  has  been  said,  that  the  gold 
premium  can  be  attributed  only  in  pait  to  the  amount 
of  the  currency  outstanding,  and  rests  partly  upon 
other  grounds,  some  of  which  have  been  named  before. 
The  gi'eat  cause  of  gold  premium  is  the  great  intens- 
ity of  demand  for  it  over  the  demand  for  other  money. 
Considering  the  foreign  indebtedness  of  the  countr}'", 
that  demand  is  next  to  absolute,  and  must  be  met ; 
and  so  Ions:  as  that  demand  continues,  gold,  while  insuf- 
ficient  in  supply  to  readily  meet  the  demand,  will  be  at 
a  premium  over  any  paper  money  that  cannot,  at  will, 
be  converted  into  coin  ;  not  because  there  may  lie  too 
much  paper,  but  because  of  an  insufficiency  of  gold  to 
readily  and  easily  meet  the  demand.  The  truth  of 
this  proposition  is  evidenced  by  facts  which  have  existed 
in  several  nations.  Cash  payments  have  been  sus- 
pended in  Eussia  over  sixty  years.  During  that  time, 
up  to  1870,  her  paper-money  averaged  near  750,000,- 
000  roubles,  and  the  gold  premium  was  from  17  to  29 
j)er  cent.  Between  1870  and  1876,  her  paper  money 
was  increased  to  about  1,000,000,000  roubles,  and  the 
jjremium  on  gold  fell  to  10  to  15  per  cent.  Italy  had 
about  $50,000,000  of  paper  money  in  1866,  and  gold 
was  at  a  premium  of  from  19  to  20  per  cent.  In  that 
year  the  government  authorized  the  Bank  to  issue  in- 
convertible leeal  tender  notes.  Resulting  from  this 
act  the  total  paper  money  was  increased  to  $300,000,- 
000  in  1874,  and  gold  fell  to  3  per  cent,  premium. 
The  case  of  France  is  a  very  striking  one.     In   1870, 


118    PRICES  OF  PROPERTY  AXD  GOLD  PREMIUM  : 

the  Bunk  of  France  suspended  specie  payment.     The 

effects  of  this  upon  the  notes  and  gold  premium   are 

thus  described  by  M.  Victor  Bonnet : 

"The  movements  of  the  paper-money  circulation  in- 
flicted on  France  by  the  war,  are  destined  to  surprise 
a  multitude  of  people.  There  is,  in  those  movements, 
a  complete  overturning  of  the  economic  and  financial 
ideas  which  the  best  authorities  had  endeavored  to 
establish  in  the  previous  history  of  monetary 
science.  These  authorities  have  alwa3^s  raised 
their  warning  voices  against  paper-money  and  legal- 
tender  laws.  They  tell  us,  with  one  accord,  that  if 
the  quantity  of  paper  money  be  not  strictly  limited, 
and  excessive  issues  prevented,  the  public  confidence 
will  fail  and  depreciation  will  soon  follow.  In  appar- 
ent defiance  of  these  sound  principles,  we  find  that  in  the 
midst  of  the  war  troubles  of  France,  paper  money  to 
the  amount  of  1,800,000,000  francs  was  issued  and 
has  been  kept  at  par  by  means  of  a  coin  reserve  of 
600,000,000  francs,  or  33  per  cent.  This  paper  money 
never  for  a  single  moment  lost  its  value,  or  fell  to  a 
discount  until  the  first  payments  were  made  to  Prussia. 
At  that  crisis  the  premium  on  gold  rose  to  two  and 
one-half  per  cent.,  and,  strange  to  say,  this  premium 
on  gold  fell  immediately  when  the  law  was  passed  to  ex- 
pand the  circulation,  and  to  increase  the  issues  beyond 
1400,000,000  francs,  which  was  the  limit  at  first  assigned 
to  the  maxinmm  of  the  note  issues.  In  November, 
1871,  these  issues  were  2,300,000,000  francs,  and  the 
depreciation  two  and  one-half  per  cent.  At  the  end  of 
January,  1872,  the  issues  were  2,450,000,000  francs,  and 
the  depreciation  had  fallen  to  one  per  cent.  At  length, 
after  the  lapse  of  a  certain  period,  when  new  issues  had 
been  authorized,  and  the  legal  limit  had  been  fixed  at 
3,200,000,000  francs,  the  premium  on  gold  was  merely 
nominal,  and  nobody  paid  any  attention  to  it  except 
those  concerned  in  the  forei^jn  exchanges.  The  singu- 
larity  of  this  was  the  more  noteworthy  because  these 
large  emissions  of  notes  took  place  amidst  grave  incer- 


CAUSES  OF  THEIR    RISE    AND    FALL.  119 

titude.  For,  in  the  first  place,  France  was  paying  her 
immense  indemnity  to  the  Prussians,  and  was  seeking 
in  every  possible  way  to  augment  her  specie  resources  ; 
and,  secondly,  she  seemed  likely,  in  spite  of  all  she 
could  do,  to  lose  her  whole  aggregate  of  coin  circula- 
lation .  Never  before  had  such  dangers  been  surmounted 
with  so  much  success." 

The  reason  for  this  phenomenon  in  French  finance 
seems  plain  to  me.  It  is  this  :  by  the  issuance  of  large 
amounts  of  legal  tender  paper,  the  uses  for  coin  in 
internal  commerce  were  reduced  proportionately. 
The  extent  and  intensity  of  the  demand  for  coin  were 
thus  diminished,  and  the  demand  for  foreign  shipments 
the  more  easily  and  readily  supplied.  The  abundance 
of  paper-money  stimulated  all  business,  and  created 
for  France  a  great  foreisrn  trade.  The  fiscal  trans- 
actions  of  the  government  were  very  profitable  in  buy- 
ing bills  of  exchanofe.  These  transactions  reduced  the 
demand  for  and  augmented  the  supply  of  coin. 

So  it  was  in  England.     In  regard  to  gold  premium, 

Mr.  Huskison  remarked  in  Parliament : 

"The  difference  between  the  market  and  the  mint 
price  of  gold  was  erroneously  considered  as  a  test  of 
the  superabundance  of  paper  in  the  home  market ;  but 
it,  in  reality,  arose  from  a  very  different  cause,  the 
gold  was  sent  out  of  the  country  to  pay  up  foreign 
loans  and  to  meet  the  wants  of  British  travelers.  The 
experience  of  late  years  decisively  proved  that  the  doc- 
trine of  the  Bullion  Conniiittee  in  1810,  that  the 
difference  between  the  market  and  the  mint  price  of 
gold  was  owing  to  an  over-issue  of  pa[)er  and  was 
measured  by  its  amount,  was  decisively  disproved  by  the 
facts  which  had  since  occurred.  In  1814,  the  bank 
issues  were  £23,600,000,  and  the  market  price  of  gold 
was  £5  lO.s.  per  ounce;  in  181,")  the  l)ank  paper  was 
£26,300,000,  and  the  price  of  gold  had  fallen  to  £4  6s.  6d. 


120    PRICES  OF  PROPERTY  AND  GOLD  PREMIUM  : 

per  ounce  ;  proving  that  the  price  of  gold  was  owing 
to  the  enhanced  demand  for  it  on  the  Continent,  to 
meet  the  exigencies  of  foreign  war,  and  not  to  any 
excess  in  the  domestic  circulation." 

The  fall  of  the  premium  on  gold  in  1876  and  in  1877 
in  the  U.  S.  is  due,  not  more  to  the  reduction  of  the 
volume  of  the  currency,  than,  1st,  to  the  enormous  for- 
eign balances  in  favor  of  this  country  which  accrued  in 
those  years  ;  and,  2nd,  to  the  great  decrease  in  custom 
receipts  ;  both  of  which  reduced  the  demand  for  gold. 
The  final  settlement  of  the  political  troubles  in  the 
Southern  States  in  1877  contributed  also  to  the  decline 
in  gold  premium. 

It  has  been  common  for  writers  on  finance  to  assume 
that  prices  of  commodities  are  controlled  by  the  sum 
of  gold  and  silver  in  the  world.  This  was  doubtless  the 
case  before  paper  money  came  into  general  use.  But 
if  that  class  of  thinkers  will  take  the  pains  to  examine 
the  amounts  of  paper  currency  in  the  world,  and  the 
general  prices  of  commodities  during  the  last  fifty  years 
they  will  find  that  prices  have  advanced  with  an  in- 
crease of  the  aggregate  amount  of  paper  and  deprecia- 
ted with  a  decrease  of  it. 

There  is  now  no  sufficient  decrease  in  the  world's  an- 
nual supply  of  the  precious  metals .  for  that  alone  to 
cause  the  universal  fall  of  prices  experienced.  The 
cause  of  the  general  shrinkage  of  values  rests  in  the  .re- 
duction of  the  total  volume  of  money  in  the  civilized 
world,  produced  by  the  demonetization  of  silver  in  Eur- 
ope and  the  United  States,  and  the  reduction  *of  the 
volume  of  paper  money. 

If  one  nation  make  paper  money  serve  for  internal 
«ommcrce,  the  uses  for  gold  and  silver  in  that  country 


CAUSES  OF  THEIR  lUSE  AND  FALL.  121 

are  diminished  just  that  much,  and  the  extent  of  the 
demand  for  coin  is,  in  consequence,  reduced  in  equal 
proportion.  It  also  increases  the  metal  supply  of  other 
nations,  because  a  plentiful  sup[)ly  of  paper  money  in 
a  nation  drives  coin  a])road,  and,  the  aggregate  demand 
for  it  being  thus  reduced  while  the  supply  of  it  remains 
undiminished,  reduces  its  value,  that  is,  its  purchasing 
power.  If  all  nations  used  paper  money  exclusively  in 
internal  commerce  then  the  world's  demand  for  coiii 
for  internal  conniierce  would  be  extinct  and  its  use  would 
be  confined  to  settling  foreign  balances  and  pa\nng  for- 
eign interest.  The  general  demand  for  metal  money 
would  proportionately  decrease  and,  of  course,  its  value 
would  depreciate. 

In  proportion  as  a  country's  uses  for  coin  increase  or 
diminish  in  proportion  to  the  supply  thereof,  the  value 
of  coin  as  compared  with  that  of  paper  money  increases 
or  diminishes  ;  and  as  the  world  increases  the  aggregate 
volume  of  circulating  money,  both  coin  and  paper, 
prices  will  advance,  but  not  necessarily  in  the  same 
ratio. 

As  an  example  of  the  first  part  of  this  proposition 
we  refer  to  the  years  1871,1873  and  1877.  In  1871 
this  country  exported  ten  millions  more  of  gold  and 
silver  than  in  1873,  and  yet  gold  was  on  an  average 
two  per  cent,  lower  the  former  than  the  latter  year. 
This  resulted  from  the  fact  that  the  shipments  of  gold 
and  silver  in  1871  nearly  settled  that  year's  foreign 
balances  aorainst  this  country,  and  the  demand  for  the 
precious  metals  was  nearly  satisfied,  while  in  1873  the 
exports  of  merchandise,  gold  and  silver  left  nearly 
$60,000,000  balance  against  this  country,  and  on  that 
account  the  demand  for  coin  in  this  country  was  inten- 


122    PRICES  OF  PROPERTY  AXD  GOLD  PREMIUM  : 

aified,  because  the  supply  was  not  nearly  equal  to  the 
demand. 

In  1877  the  prem?uni  on  gold  fell  to  2f  per  cent., 
because  the  decrease  of  custom-  receipts  and  the  enorm- 
ous balances  of  trade  in  favor  of  the  U.  S.  were  applied 
to  satisfy  the  demand  for  the  precious  metals,  thus 
reducing  the  intensity  of  the  demand. 

In  proof  of  the  second  clause  of  the  foregoing  pro- 
position, we  refer  to  the  fact,  Avell  authenticated  by 
history,  that  soon  after  the  close  of  the  ^rars  of  Napo- 
leon Bonaparte,  in  1816,  all  the  great  powers  of  Eu- 
rope proceeded  to  fund  their  floating  and  unfunded 
debts,  and  to  reduce  the  amount  of  paper  currency, 
and  that  upon  the  heels  of  this  came  a  universal  fall 
in  prJ-^-es  there.  On  the  other  hand,  between  the  years 
1849  and  1860,  there  was  a  great  increase  of  the  vol- 
ume of  paper  money,  and  a  simultaneous  advance  of 
prices. 

From  1840  to  1860  the  Bank  of  Ens-land  increased 
her  issues  about  $15,000,000.  From  1854  to  1863 
the  Bank  of  France  increased  her  issues  $35,000,000. 
From  1850  to  1870  Germany  increased  her  paper 
money  from  $80,000,000  to  $182,000,000.  From  1852 
to  1861  Austria  increased  her  bank  notes  from  192,- 
600,000  florins  to  475,200,000.  From  1830  to  1858 
Russia  increased  her  paper  money  from  639,000,000 
roubles  to  755,297,000.  Bank  notes  in  the  U.  S.  in- 
creased from  $105,000,000  in  1847  to  $207,000,000  in 
1860.  General  prices  advanced  with  this  increase  of 
paper  money. 

Again,  on  the  other  hand,  since  the  Franco-Prussian 
war,  and  since  the  demonetization  of  silver  by  Prussia  and 
the  U.  S.,  and  the  restriction  of  its  coinage  by  France, 


CAUSES  OF  THEIR  RISE  AND  FALL.  12$ 

and  a  reduction  of  the  volume  of  i)apcr  money  by  th© 
U.S.  a  $1,000,000,000,  there  has  been  a  diminution 
of  the  aggregate  sum  of  money,  coin  and  paper, 
l^er  capita,  in  Europe  and  America,  and  at  the  same 
time  an  increase  of  the  airij^re}2;ate  indebtedness  of  those 
countries,  thus  increasing  the  uses  for  money,  while 
the  supply  thereof  has  been  cut  down.  The  result  ha» 
been  a  universal  fidl  of  prices  on  both  continents. 

From  the  foregoing  Ave  lay  down  the  following  con- 
clusion as  indisputable  propositions : 

1st.  The  premium  on  co'n  in  the  world,  or  in  anj 
country,  depends  upon  the  extent  and  intensity  of  de- 
mand for  it,  as  compared  with  the  extent  and  intensitj 
of  the  demand  for  other  kinds  of  money. 

2d.  The  purchasing  power  or  value  of  coin  depends 
upon  the  extent  and  intensity  of  the  demand  for  it, 
caused  by  the  extent  of  its  uses,  as  compared  Avith  the 
demand  and  supply  of  any  other  thing,  or  all  other 
things. 

3d.  In  proportion,  as  the  Avorld  or  any  country  in- 
creases its  volume  of  paper  money,  it  decreases  it» 
uses  for,  and  the  purchasing  power  of,  coin,  and  vice 
versa . 

4th.  The  price  of  property  and  labor  are  controlled 
by  the  aggregate  sum  of  money,  coin  and  paper,  in 
circulation,  as  moditied  by  soil,  climate,  seasons  and 
the  conditions  of  man  and  nations. 

As  any  country  increases  its  paper  circulation,  it  adda 
to  the  Avorld's  aggregate  stock  of  money,  and  reduces 
its  own  uses  for  coin,  which  tends  to  produce  both  a 
rise  in  values  of  property  and  labor  and  a  fall  in  the 
purchasing  power  of  com,  both  of  which  are  benefac- 
tions to  mankind. 


124    PRICES  OF  PROPERTY  AND  GOLD  PREMIUM  : 

The  United  States  being  a  debtor  country,  and  com- 
pelled to  pay  immense  sums  of  coin  interest  to  foreign 
capitalists  annually,  would  act  wisely  to  transact  all  her 
internal  commerce  with  paper  money,  thus  increasing 
the  world's  aggregate  supply  of  money,  decreasing  the 
value  of  coin  and  increasing  the  value  of  property  and 
the  prices  of  her  exported  commodities. 

It  seems  to  be  a  common  delusion  that,  because  gold 
has  fallen  to  a  little  below  three  percent,  premium,  the 
whole  question  of  resumption  is  simply  what  Mr. 
Ricardo  of  England  said  m  1819,  only  a  question  of  three 
per  cent.  ;  three  per  cent,  decline  in  gold  and  three 
per  cent,  decline  in  values.  No  greater  error  ever  mis- 
led or  calamity  befell  England  than  that  hallucination, 
and  probably  no  greater  could  befall  this  country  than 
that  of  regulating  our  finances  b}--  such  a  theory.  No 
man  can  foretell  what  amount  of  contraction  of  the 
currency  will  be  necessary  to  bring  paper  to  par  wdth 
gold,  nor  can  any  one  fathom  the  depths  to  which  prices 
will  fall  in  consequence  of  contraction. 

In  England  they  experienced  a  fall  of  prices  of  fifty 
to  one  hundred  per  cent.  A  contraction  of  the  volume 
of  money  always  produces  a  fall  of  prices  ;  though  gen- 
eral confidence  and  lil)eral  extensions  of  credit,  as  in 
this  country  up  to  1873,  retard  the  fall.  But  after  a 
crisis,  when  general  confidence  is  shaken  and  capital  is 
cautious  and  credit  doled  out  sparingly,  the  fall  of  prices 
is  greatly  accelerated.  Many,  no  doubt,  believe  that 
in  1879  paper  will  certainly  be  at  par  with  gold,  and 
that  par  is  the  point  of  safety. 

■  Par  would  be  possible  under  certain  circumstances. 
For  instance,  if  our  net  foreign  balances  of  1878  should 
be  more  than  our  foreign  interest,  paper  would  reach 


CAUSES  OF  THEIR  RISE  AND  FALL.  125 

irold  value,  unless  war  or  some  accident  should  inter- 
vene  to  prevent  it.  But  there  is  no  pro])abiliiy  of  such 
a  balance  of  trade  in  our  favor.  The  indications  are 
that  we  have  reached  the  maximum  of  our  foreign  bal- 
ances for  several  years  and  that  they  will  be  less  in  the 
future.  If  our  foreign  interest  should  be  several  mil- 
lions more  than  our  foreign  balances  in  1878,  which  is 
possible,  then  instead  of  a  decline  in  gold  premium  an 
advance  would  necessarily  follow. 

The  country  should  beware  of  the  hope  that  rests  on 
foreisfn  balances  and  accumulations  of  coin.  It  is 
treacherous. 

Par  on  one  side  and  gold  premium  on  tlie  other  form 
an  illimitable  perspective  from  the  outlook  of  existing 
circumstances,  without  such  a  reduction  of  the  volume 
of  money  and  of  prices  as  to  almost  destroy  business. 
If  the  provisions  of  the  resumption  act  should  be  car- 
ried out,  a  continued  and  heavy  contraction  of  the  vol- 
ume of  the  currency  will  result  ;  every  debt  and  obli- 
gation ill  the  land,  $2:i, 000,000,000  of  tliem,  will  be 
payable  in  toin,  after  all  the  legal  tenders  shall  have 
been  redeemed.  This  will  make  capital  timid,  cut  off 
credit,  and  liring  the  business  of  the  country  to  cash 
transactions.  Then  ever^•thino:  in  the  land  will  he  for 
sale  without  a  purchaser.  The  extent  of  the  fall  of 
the  values  of  property  of  all  kinds,  including  corpora- 
tion stocks,  bonds  and  securities,  cannot  be  estimated. 
Thev  must  shrink  enough  to  bring  it  ^^ithin  the  power  of 
the  money  that  may  then  exist  to  move  all  the  vast 
property  that  enters  into  the  commercial  and  business 
transactions  of  the  country.  To  effect  this  the  shrink- 
as:e  of  values  must  be  crreat.  In  England  from  1818 
onward  the  contraction  of  the  volume  of  currencv  from 


126    PRICES  or  PROPERTY  AND  GOLD  PREMIUM. 

about  £48,000,000  to  £26,000,000  caused  a  general  fall 
of  prices  of  from  50  to  100  per  cent.  The  full  in  this 
country  wdll  doubtless  exceed  25  per  cent.  ;  nothing  in- 
dicates that  it  can  be  less.  A  par  of  gold  and  paper 
can  be  reached  by  a  sufficient  reduction  of  the  volume 
of  paper  if  no  accident,  and  no  more  intense  demand 
for  the  former  than  for  the  latter,  intervenes  to  prevent 
it,  but  it  will  be  disastrous  to  business.  We  need  not 
indulge  in  gilded  hopes .  We  cannot  escape .  The  effects 
of  a  contraction  of  the  currency  are  inevitable .  Resump- 
tion will  destroy  one-fourth  of  the  commercial  value  of 
the  property  of  tliis  country. 


CHAPTER   IV. 


PAR  :    ITS    LAWS. 


This  little  word  is  harmless  in  the  abstract ;  but,  ef- 
forts to  apply  it  to  unequal  things,  are  dangerous  ex- 
periments. To  force  a  par  of  things,  which  by  nature  or 
circumstances  are  different,  is  to  disregard  the  laws  of 
their  difference,  and  to  produce  evil  results.  No  law 
can  be  broken  Avith  impunity.  Retribution  will  follow. 
This  principle  applies  to  money  with  the  same  force  as 
to  the  physical  or  social  world. 

Money  is  a  thing  of  value,  as  money ;  its  principal 
use  is  to  effect  commercial  exchanges,  and  its  sum 
ought  to  be  commensurate  with  the  requirments  of 
commerce.  There  are  two  kinds  of  money  in  this 
country.  They  are  different  in  value  and  volume. 
Value  is  regulated  by  demand  and  supply.  To  bring 
them  to  par,  one  of  two  things  must  be  done.  1st, 
Increase  the  amount,  or  destroy  the  uses  for  the  dearer 
money,  until  the  intensity  of  the  demand  for  it  be 
reduced,  so  as  to  correspond  Avith  the  intensity  of  the 
demand  for  the  cheaper  money  ;  or,  2d,  Reduce  the 
amount  and  increase  the  uses  for  the  cheaper  money, 
until  the  intensity  of  the  demand  for  it  be  increased, 
so  as  to  correspond  with  the  intensity  of  the  demand 


128  par: 

for  the  dearer  money.  A  part  of  the  second  method, 
that  of  reducing  the  amount  of  the  cheaper  money — 
paper — is  the  phm  adopted  by  the  government  of  the 
United  States,  to  force  a  par  of  money  values.  The 
laws  of  the  difference  in  value  of  these  moneys  is  the 
greater  intensity  of  the  demand  for  coin  than  for  paper. 
The  law  of  the  supply  of  paper  money  should  be  the 
requirements  of  commerce.  The  supply  of  both  is  not 
greater  than  the  extent  of  the  demand. 

If,  then,  the  government  pursue  the  policy  adopted 
of  so  reducing  the  volume  of  paper  money  as  to 
increase  the  intensity  of  the  demand  for  it,  until  it 
equals  the  intensity  of  the  demand  for  coin,  the  laws 
of  their  difference  vn\\  be  encroached  upon,  the  require- 
ments of  commerce  will  be  disregarded,  and  the  sup- 
ply of  paper  money  so  diminished  as  to  cripple  all 
business. 

This  country  is  not  in  demand  of  coin  for  anything, 
except  to  pay  coin  bonds,  or  coin  interest,  and  foreign 
balances  of  trade  against  it.  It  is  not  in  demand  of  a 
dollar  in  coin  for  its  internal  business.  It  needs  more 
money,  but  paper  will  serve  every  purpose.  The  stock 
of  coin  in  the  country  is  small,  and  the  annual  sup- 
plies are  nearly  consumed  in  the  arts,  and  in  foreign 
interest.  The  supply  of  it  is  so  small  compared  with 
the  millions  upon  millions  of  coin  liabilities,  that  the 
demand  for  it  is  intense.  To  force  a  par  by  resump- 
tion of  specie  payments  will  still  further  intensify  the 
demand  for  coin,  because  its  uses  will  be  greatly  in- 
creased without  a  corresponding  increase  in  supply. 

There  are  now  about  $2,000,000,000  of  coin  obliga- 
tions owing  by  this  country,  with  the  pittance  of  $150,- 
000,000  to  $235,000,000  of  specie  to  pay  them  with. 


ITS    LAWS. 


129 


On  resumption  day  that  sum  of  coin  obligations  will 
swell  to  $2.'), 000, 000,000,  and  the  country  will  have 
about  a  hundredth  part  of  it  in  coin.  This  enormous 
increase  in  the  demand  for  coin,  Avill  greatly  intensify 
the  demand  for  it :  will  greatly  enhance  its  value,  or 
purchasing  power.  The  process  of  reaching  par  will 
be  one  of  laborious  and  fatiguing  ascent  towards  a 
constantly  rising  point.  For  paper  money  to  reach  the 
elevated  point  of  par,  its  volume  must  be  diminished 
until  every  dollar  of  it  can  be  redeemed  in  coin  when- 
ever called  for,  and  the  demand  for  it  must  be  increased 
until  it  equals  the  demand  for  coin.  This  ^^^ll  greatly 
enhance  its  value  —  its  purchasing  power. 

The  result  of  this  process  of  enhancing  the  value  of 
paper  money  to  par  value  Avith  coin,  by  force  of  the 
resumption  act,  Avill  necessitate  a  very  great  deprecia- 
tion of  the  values  of  all  property,  real  and  personal, 
and  a  corresponding  falling  off  in  the  amount  of  all 
business.  As  the  elevated  point,  par,  is  a  constantly 
rising  one,  so  the  bottom  of  depreciation  of  values  will 
be  a  constantly  receding  one.  It  is  a  common  error  to 
suppose  that  par  is  the  goal,  the  central  point,  to  which 
all  financial  theories  ought  to  tend.  Par  is  a  good 
thing  when  it  is  produced  by  a  condition  of  things 
consistent  with  the  business  interests  of  the  country. 
But  in  every  case  where  it  has  been  produced  by  force 
of  legislation,  it  has  been  attended  by  great  distress 
of  the  people. 

The  only  thing  indicated  by  coin  premium  is  an 
intensity  of  demand  for  it,  superior  to  that  for  paper. 
The  only  thing  indicated  by  par  is  an  equipoise  of  de- 
mand for  the  two  kinds  of  money.  Par  and  coin  pre- 
mium bear  no  relation  whatever  to  the  commercial  or 


130  PAR : 

industrial  conditions  of  the  country,  and  neither  the  one 
nor  the  other  affects  the  commercial  or  industrial  con- 
ditions of  the  country,  unless  they  are  produced  by 
laws  or  forces  inconsistent  ^vith  a  healthy  condition  of 
business.  It  makes  no  kind  of  difference  to  a  people 
whether  the  money  used  in  their  internal  commerce  be 
at  par  or  not,  so  they  have  enough  of  it  to  transact  all 
their  business.  It  may  make  no  difference,  and  at 
most,  it  will  make  be  but  little  difference,  whether  their 
mone}'  is  at  par  so  far  as  their  foreign  commerce  is 
concerned,  because  the  business  of  nations  with  each 
other  is  always  transacted  on  a  coin  basis  of  prices  and 
the  balances  are  easily  adjusted 

It  is  commonly  held  that  low  exchanijes  in  a  com- 
mercial  center  result  from  the  depreciation  of  the 
money  of  that  place,  and  are  detrimental  to  commerce. 
Neither  of  these  propositions  is  necessarily  true.  Low 
exchanges  may  result  from  other  causes,  and  may  not 
be  detrimental  to  commerce.  If  New  York  pay  her 
bills  in  coin,  they  Avill  be  worth  in  the  commercial 
world  what  other  similar  ))ills  are  worth,  unless  some 
special  cause  makes  those  on  English  or  other  houses 
worth  more.  If  New  York  paj'  them  in  depreciated 
paper,  they  are  discounted  b}'  the  draAver  in  proportion 
to  the  discount  of  the  paper.  So  that  low  exchanges  in 
New  York  are  not  a  loss  to  the  drawer  or  acceptor,  nor 
are  they  depressing  on  New  York  commerce ,  except  in  case 
of  a  constant  falling  in  value  of  New  York  money. 
Even  in  that  case,  the  depreciated  currency  of  New 
York  will,  if  there  be  plenty  of  it,  so  stimulate  all  in- 
dustry and  business  as  to  fully  oifset  all  losses  caused  to 
her  foreijjn  commerce  by  her  low  exchanijes.  Premium 
on  coin  does  not  affect  the  ])rotits  on  exjiorts.     The  only 


ITS    LAWS.  131 

loss  to  the  country  in  prices  is  in  the  very  slight  enhance- 
ment of  the  value  of  inii)orted  articles  caused  by  the 
premium  on  coin  import  duties,  and  the  foreigner  or 
importer  does  not  get  this  ;  it  goes  into  the  government 
coffers . 

The  people  who  talk  and  write  so  much  in  favor  of 
par,  lose  sight  of  the  best  uses  of  money  and  the  place 
where  its  greatest  blessings  rest.  "Money  is  the  sinews 
of  war."  It  is  the  vehicle  of  commerce  ;  the  life  of  the 
industries  in  peace.  The  greatest  and  best  use  of  money 
is  to  vitalize  industry  and  facilitate  internal  commerce. 
These,  as  compared  with  foreign  commerce,  are  of 
paramount  importance.  Our  foreign  commerce  is 
about  one  thousand  millions  of  dollars  a  year.  Our  in- 
ternal commerce  is  at  least  one  hundred  thousand  mil- 
lions ;  one  hundred  times  o-reater  than  our  foreicrn 
commerce.* 

Where,  then,  rest  the  greater  interests  of  money? 
Every  one  must  admit  that  they  rest  with  the  internal 
business  of  the  (-ountry.  Will  it  pay  to  force  paper  to 
par  to  facilitate  foreign  exchanges  by  so  reducing  our 
volume  of  currency  as  to  dry  up  the  arteries  of  this 
great  internal  commerce — ^the  life  of  the  industries? 
No  patriot  who  understands  the  terrible  effects  of  such 
a  measure  will  defend  it.  Some  imagine,  because  silver 
is  worth  less  than  legal  tenders,  that  if  that  metal  were 
remonctized,  par  and  resumption  wouhl  both  be  already 
accomi)lished.      That   hallucination    may    be    another 

*The  New  York  clearings  for  1877  were  $20  87(5,555,937.  This  we 
estimate  as  40  per  cent,  of  the  clearings  of  all  the  great  cities  in  the 
United  States.  The  sum  of  the  business  of  all  the  great,  commercial 
centers  would  then  be  $50,000,000,000.  Tlie  business  of  the  smaller 
cities,  villages,  towns,  country  trading,  etc.,  will  eciual  this  nmouut; 
making  $100,000,000,000  as  the  total  sum  of  tuternal  transactions  of 
the  country  for  1877. 


132  PAR ; 

"will-o'-the-"vvisp"  to  lead  us  through  thorns  and  quag- 
mh'es  of  affliction. 

Let  us  examine  the  results  of  the  remonetization  of 
silver.  The  first  effect  would  be  to  greatly  enhance  its 
value,  not  only  here  but  in  Europe.  It  would  assume 
exactly  the  position  which  gold  now  holds  in  this  coun- 
try. Gold,  perhaps,  would  remain  at  a  slight  premium 
over  silver  ;  perhaps  they  would  assume  par.  Silver 
would  appreciate  to  par  with,  perhaps  to,  a  premium  over 
paper.  AlmcKst  every  ounce  of  gold  would  leave  the 
country  if  it  remained  at  a  j^remium  over  silver. 

Silver  would  take  its  place  in  the  bank  vaults  and 
the  pu])lic  treasury  as  redemption  money.  All  the  coin 
liabilities  of  the  country  would  be  payable  in  silv^er. 
This  would  tend  to  cause  a  constant  flow  of  that  metal 
outward,  to  pay  our  foreign  interest,  and  balances  against 
us.  But  silver  would  be  at  a  slisfht  advance  here  above 
its  value  in  Europe,  perhaps.  It  might  also  be  higher 
in  India  and  all  Asia  than  in  Europe,  because  it  is  Asia's 
money.  The  demand  of  Asia  for  silver  is  insatiable. 
All  the  Asiatic  l)alances  of  Europe  would  be  settled 
in  silver.  This  would  nearly  consume  the  annual  pro- 
ducts of  the  mines,  less  that  used  in  the  arts.  Then 
there  would  be  left  no  considerable  stock  of  silver  to 
be  shipped  to  the  United  States.  We  think  it  prob- 
able that  the  increased  exportation  of  our  gold  stock, 
which  would  follow  the  remonetization  of  silver,  would 
nearly  equal  in  amount  the  increased  importations  of 
silver,  which  would  be  caused  by  its  higher  value  here. 

We  could  not  ex]3ect  a  raj^id  or  considerable  increase 
of  our  coin  stock,  bv  reason  of  the  remonetization  of 
silver.     Persons  who  claim  that  the  remonetization  of 


ITS    LAWS.  133 

silver  is  all  this  country  needs,  because  paper  will  be  at 
par  with  it,  are  in  great  error. 

They  lose  sight  of  the  more  important  consequence 
that  resumption,  with  silver  remonetized,  will  neces- 
sitate almost  as  great  a  diminution  of  our  volume  of 
money  as  it  would  with  only  gold  coin.  This  will  be 
the  case,  because  the  remonetization  of  silver  does  not 
reduce  our  foreign  demands  for  coin,  it  will  increase 
the  value  of  the  products  of  the  mines  only  to  the 
extent  of  the  appreciation  of  the  value  of  silver,  and 
in  the  future,  as  in  the  past,  all,  or  nearly  all,  our  gold 
and  silver  products  and  foreign  balances  of  trade  will 
be  consumed  in  paying  off  foreign  interest.  And  here 
is  the  great  evil  of  forcing  a  par — the  contraction  ,  of 
the  volume  of  money  so  as  to  reduce  values,  cripple 
business,  and  throw  laborers  out  of  emplo\mient. 

Remonetization  of  silver  will  benefit  the  country. 
It  will  benefit  the  world,  because  it  will  appreciate 
the  value  of  silver  several  per  cent.,  and  this  will  vir- 
tually add  that  increase  to  the  world's  stock  of  money, 
and  tend,  very  slightly,  to  advance  prices  of  property. 
It  will  benefit  the  United  States  particularly,  by  caus- 
ing capitalists  and  banks  to  unhoard  large  amounts  of 
money  now  held  by  them.  This  would  give  a  consider- 
able vitality  to  business  for  a  short  time,  but  it  could 
not  continue  long,  for  the  processes  of  resumption 
would  soon  produce  a  contraction  equally  as  great  as 
the  amount  that  might  be  unhoardcd. 

Remonetization  of  silver  will  not  save  the  country 
from  the  blighting  effects  of  a  forced  par  value  of 
paper  and  coin.  It  will  not  prevent  a  large  contraction 
of  the  volume  of  money.      A  forcing  of  par  in  the 


134  PAK  . 

social  world  has  desolated  homes,  destroyed  kingdoms, 
and  caused  human  gore  to  flow  in  streams. 

It  was  this  terrible  idea  of  forcing  a  par  of  the 
lower  and  higher  orders  of  people  which  made  a  hell 
of  France  in  1789.  Repeal  the  laws  which  are  in- 
tended to  force  a  par.  Let  par  come  of  its  own  ac- 
cord, when  the  natural  laws  of  finance  and  commerce 
bring  it.  But  let  it  not  be  forced  to  the  destruction  of 
the  peace  and  prosperity  of  the  country. 


CHAPTER  V. 


GOLD,  SILVER    AND    PAPER   MONEY  : 
CIVILIZATION  ;    INCREASE    OF    COMMERCE. 

The  Monetary  Commission,  in  their  rei3ort,  page  78, 
estimate  the  total  products  of  the  Avorld's  gold  mines 
from  1492  to  1848,  at  $2,()26,000,000,  and  from  1849 
to  1876,  inclusive,  at  $3, 2 15, 000, 000, making  the  total 
gold  products  from  1492  to  1876  $5,841,000,000. 
What  the  stock  of  gold  was  in  1492  is  not  known,  but 
it  must  have  been  $1,000,000,000,  because,  at  the  be- 
ginning of  the  Christian  era,  Rome  alone  had  $1,800,- 
000,000  of  gold  and  silver  money.  Prior  to  that  time 
Greece,  Persia  and  Isroel  had  been  very  rich  in  these 
metals,  and  since  that  time  the  mines  of  Spain,  as  well 
as  others,  yielded  gold  and  silver. 

Then,  to  the  total  products  of  gold  since  1492,  add 
$1,000,000,000,  and  it  gives  $6,841,000,000  as  the  total 
sum  of  gold  on  hand  and  produced  in  and  since  1492. 
Mr.  Fawcett  estimated  the  total  stock  of  gold  money 
and  bullion  in  the  world  in  1877  at  $2,700,000,000. 
Deduct  this  from  the  last  sum  given  and  it  leaves 
$4,141,000,000  of  gold  lost,  destroyed  and  used  in  the 
arts  since  1492 — nearly  %  of  the  total  sum,  and  |§  of 
the  total  products  since  that  date. 

It  will  be  seen  from  the  f oreo^oing  that  the  total  o;old 


136  GOLD,  SILVER  AND  PAPER  MONEY: 


products  of  the  last  27  years  have  exceeded  those  of 
the  precedmg  350  years  by  about  $600,000,000. 

But,  while  the  products  of  gold  have  so  rapidly  in- 
creased, its  use  in  the  arts  has  increased  even  more  rap- 
idly, as  will  be  seen  from  the  following  table  taken 
from  "Gold  and  Debt,"  showing  the  products,  the 
amount  consumed  in  the  arts,  addition  to,  and  decrease 
of,  the  stock  of  gold  for  periods  of  5  years. 

Periods  Addition  to  Decrease 

ofSyrs         Productions  Consumption  Stock  of  Stock 

1840  4. $150,000  000  $132  000,000  $   18  000,000 

1845  9..  196, 000  000..  149, 000  000..  47  000  000 

1850  4.. 660. 000  000..  180,000  000.  .480  000  000 

1855  9.. 680  000,000.. 295, 000  000.. 385, 000  000 

1860  4.. 560  000,000.. 398  000,000.  .162,0  0  000 

1865  9.  .615,000,000.  .475.0 )0,000. .  140.0^0,000 

1870  4.  .530  0)0,000.  .539,000,000 $9, 030, 000 

This  table  exhibits  three  important  facts.  First :  A 
considerable  decrease  of  production  since  1855  ;  a  rap_ 
idly  increasing  consumption  in  the  arts,  until  in  1874, 
it  exceeded  the  products  ;  a  constantly  diminishing  ad- 
dition to  the  stock,  from  1854  until  in  1874  there  was 
not  only  no  addition  but  a  diminution  of  stock  $9,000,- 
000. 

The  total  products  of  the  world's  silver  mines  from 
1492  to  1876  have  been  estimated  by  statisticians  at 
$7,071,000,000.  How  much  existed  in  1492  is  not 
known.  The  probabilities  are  that  there  was  then  about 
as  much  silver  as  gold.  Its  relative  value  to  gold  was 
higher  then  than  now. 

Let  it  be  supposed  that  there  were  $1,500,000,000 
of  silver  in  1492.  This,  added  to  the  total  products 
since,  gives  $8,571,000,000  existing  and  produced  in 
and  since  that  date.     It  is  not  known  how  much  silver 


CIVILIZATION  ;  INCREASE  OF  C0-M3IERCE.  137 

has  been  used  in  the  arts  and  ornamentation,  lost  and 
wasted  by  abrasion  since  1-492. 

The  Monetary  Commission  estimate  $10,000,000  a 
year  used  in  the  arts  in  the  U.  S. — about  22  cents  j)er 
capita  of  popuhition.  Supposing  that  three  hun- 
dred and  sixty  millions  of  people  in  Europe  and  Amer- 
ica consume  the  same  per  capita  amount,  they  Avould 
consume  about  $80,000,000  of  silver  in  the  arts  a  year. 
Then  making  the  low  estimate  of  3  cents  per  capita  for 
the  1,000,000,000  of  people  iu  the  rest  of  Europe, 
British  North  America,  Mexico,  Central  and  South 
America,  Asia  and  Africa,  the  total  consumption  of  sil- 
ver in  the  arts  and  for  ornamentation  would  be  about 
$110,000,000  a  year  now.  If  this  calculation  be  cor- 
rect, there  is  now  no  annual  addition  to  the  stock  of 
silver  coin  and  bullion,  but  a  yearly  diminution  of  it. 
But  the  present  consumption  does  not  indicate  that  con- 
sumed in  the  past,  because  the  consumption  has  in- 
creased with  the  increase  of  production. 

It  seems  reasonable  that  about  the  same  proportion 
of  silver  has  been  used  in  the  arts,  lost  and  destroyed, 
as  gold  since  1492.  Then  as  about  §  of  the  gold  has 
gone  that  way,  we  judge  that  of  the  $8,571,000,000  of 
silver  in  stock  and  produced  in  1492  and  since,  about 
$5,714,000,000  have  been  lost,  destroyed  and  consumed 
in  the  arts  and  for  ornamentation,  lea\'ing  the  Avorld's 
present  stock  of  silver  money  and  bulllion  about  $2,857,- 
000,000. 

The  distribution  of  gold  and  silver  coin  and  bullion 
in  Europe  was  estimated  by  'Mi\  Fawcett  in  1877  to  be 
as  follows : 


138  GOLD,  SILVER  AND  PAPER  MONEY 

Silver  and 
Countries  Gold  Base  Metals 

Great  Britain $442,500,000 $  80,000,000 

France 650,000,000 350,000,000 

Germany 380,000,000 370,000,000 

Austria 

Russia 

Italy 

Spain 

Sweden 

Belgium 

Switzerland 

AH  others  of  Europe 


200,000,000 
250,000,000 
145,000,000 

)>  300,000,000 200,000,000 

70,000,000 

38,000,000 

5,000,000 

.^^  360,000,000 

Total ..liO^r^^-^T^^^Oe...  $2,060,000,000 

We  think  the  estimates  for  France,  Italy  and  Russia 
are  too  large.  In  them  specie  payments  have  been  sus- 
pended, and  coin  has  borne  a  premium  during  suspen- 
sion. Premium  on  coin  drives  it  out  of  circulation. 
It  seeks  the  government  treasury,  bank  vaults  and  goes 
abroad  during  suspension. 

The  enormous  coin  fine  levied  on  France  by  Prussia 
set  the  government  of  the  former  State  and  all  its 
agents  to  work  to  command  all  the  coin  in  the  Repub- 
lic, and,  we  doubt  not,  it  did  so,  excepting  debased  coins. 

On  June  23d,  1876,  Marcaurd,  Andre  &  Co.,  Bank- 
ers of  Paris,  reported  that  the  Bank  of  France  had  in 
raults  gold  equal  to  about  $295,000,000  and  silver 
equal  to  about  $116,000,000.  Add  to  these  sums 
$100,000,000  standard  silver  hoarded  and  $60,000,000 
subsidiary  and  debased  coins  in  circulation  and  we  think 
the  sum  of  coin  and  bullion  in  France  would  be  nearly 
expressed. 

The  suspension  of  specie  payments  and  premium  on 
coin  in  Russia  and  Italy  indicate  the  exi^ortation  of  all 
gold  and  silver  except  that  needed  for  the  payment  of 


CIVILIZATION  ;  INCREASE  OF  CO.MMEKCE.  139 

foreign  interest.  The  debt  of  Russia  was  $2,149,000,- 
000  in  January,  1875.  It  has  probably  been  increased 
since  enough  to  make  the  annual  interest  on  it  $150,- 
000,000.  The  annual  interest  on  the  debt  of  Italy  is 
about  $100,000,000. 

Mr.  FaAvcett's  method  of  estimating  the  amount  of 
coin  in  all  the  European   states  except  Great  Britain, 
France  and  Germany,  is  by  comparing   their   annual 
revenues  ^vith  the  revenues  of  o-overnments  known  to 
have  a  certain  per  capita  volume  of  money,   on  tho 
theory  that  the  amount  of  revenue  collected  from  a 
certain  per  capita  supply  of  ^loney  in  one  nation  bears 
a  relation  to  the  revenue  and  per   Qapiia    supply   of 
money  in  other  nations.     It  is  true  that  the  revenue  of 
•  a  nation  will  increase  or  decrease  with  the  increase  or 
decrease  of  the  sup})ly  of  money,  Anthout  any  increase  or 
decrease  of  the  rate  of  taxation.       But  it  should  be 
borne  in  mind  that  the  revenue  of  one  nation  bears  no 
relation  to -the  revenue  of  another,  because  the  revenues 
are  regulated   with    reference  to  the  exjjenditures   of 
government,   and  not  with  reference  to  the  people's 
capacities    to    i)ay  ;  and  the   expenditures   of  govern- 
ment greatly  differ  in  different  nations,  as  well   as  in 
the  same  nation  at  different  times.     It  follows,  there- 
fore, that  the  collection  of  a  $G  per  capita  revenue  from 
a  %\2,  per  capita  volume  of  money  in  the  United  States 
does  not  indicate  that  the  per  capita  revenue  of  other 
nations  is  half  the  per  capita  supply  of  money. 

Prices  of  commodities  are  a  nmch  safer  index  to  the 
per  capita  supply  of  money,  but  they,  even,  are  not  a 
sure  one,  because,  while  the  amount  of  moncj 
always  affects  prices,  its  effects  are  modified  or  intensi- 
fied by  the  habits,  manners,  customs  and  conditions  of 


140  GOLD,  SILVER  AXD  PAPER  MONEY  : 

the  people.  Prices  in  many  of  the  states  of  Europe 
are  lower  than  in  Great  Britain  and  the  United  States. 
This  indicates  a  smaller  jper  capita  supply  of  money 
where  prices  are  lower. 

Adopting  Mr.  Fawcett's  table,  with  the  changes  indi- 
cated for  Europe,  and  adding  our  own  estimates  for 
Asia,  Africa  and  the  Americas,  we  submit  the  follow- 
ing table  of  gold  and  silver  coin  and  bullion  in  the 
world,  distributed  according  to  the  amount  set  opposite 
the  countries  named  : 

Countries  Gold  Si^^er 

Great   Britain $442,500,000 %  80,000,000 

France 370,000,000 226,000,000 

Germany 300,000.000 170,000,000 


Austria 

Russia 

Italy ..... 

Spain 

Sweden 

Belgium 

Switzerland 

All  others  of  Europe 


200,000,000 

150,000,000 

120,000,000 

;>  360,000,000 146,000,000 

40,000,000 

38,000,000 

10,000,000 

240,000,000 


Total  in  Europe . . . $1,472,500,000. . . . $1,420,000,000 

United  States .$125,500,000 .$  50,000,000 

All  other  N.  A.  States     90,000,000 50,000,000 

South  America 50,000,000 100,000,000 


The  Americas $265,500,000 $200,000,000 

Asia* $875,000,000 $1,213,300,000 

Africa 87,000,000 23,700,000 


ABia  and  Africa $962,000,000....  $1,237,000,000 


Grand   Total $2,700,000,000.. .  .$2,857,000,000 

♦The  products  of  China's  mines   are    not  kno^vn.     It  is  probable 
that  their  productions  would  add  slightly  to  the  above  tigures. 


CIVILIZATION  ;  INCREASE  OF  COMMERCE.  141 

All  estimates  of  the  stock  of  gold  and  silver  com  and 
bullion  in  Asia  and  Africa  are  little  better  than  guess. 
But  the  above  table  is  based  on  two  h}^3otheses,  at 
least  consistent  with  reason  : 

1st.  As  the  stock  of  each  metal  in  1492  must  have 
been  nearly  equal  to  the  other,  and  as  the  products  of 
each  are  now  nearly  equal,  and  the  proportion  of  each 
used  in  the  arts,  lost  and  destroyed  are  about  the  same, 
we  have  estimated  the  total  sums  of  each  metal  in  the 
world  at  the  sums  given  above  ;  then  deducting  from  the 
total  sum  of  silver  and  gold  the  amounts  of  each  esti- 
mated to  be  in  the  other  quarters  of  the  earth,  leaves  the 
quantities  in  Asia  and  Africa  at  the  amounts  above  given 
to  them. 

2nd.  The  amounts  of  the  precious  metals  in  the  four 
quarters  of  the  globe,  as  di.stributed  in  the  last  table, 
are  consistent  with  existing  facts  and  the  civilization 
of  the  people. 

Most  statisticians  reckon  Asia  to  have  an  immense 
amount  of  silver.  Mr.  Fawcett  gives  the  people  of 
that  country  about  $7  of  gold  and  silver  'per  capita. 
It  is  true  that  the  people  of  Asia  have  comparatively 
little  paper  money,  but  their  condition  of  heathenism 
and  abject  poverty  in  many  parts  of  the  country,  and 
the  rude  and  primative  state  in  which  hundreds  of 
millions  of  them  live,  and  the  low  price  of  wages  there, 
do  not  indicate  the  presence  or  need  of  any  such  sum 
of  gold  and  silver  money  as  $7  per  capita.  Further- 
more, the  profusion  with  which  the  people  of  Asia  and 
Africa  adorn  themselves  with  gold  and  silver  ornaments, 
when  they  can  get  these  metals,  indicates  a  heavy  con- 
sumption of  them  in  that  way. 

A  nation's  uses  for  money  increase  with  its  advance- 


142  GOLD,  SILVER   AND    PAPER    MONEY  .* 

ment  in  civilization  ;  more  properly,  a  nation  developes 
civilization  and  wealth  in  proportion  to  its  supply  of 
money.  The  per  capita  supply  of  money,  both  coin 
and  paper,  of  the  nations  indicate  very  correctly  the 
degree  of  civilization  existing  in  the  four  quarters  of 
the  globe. 

Follo^ving  is  a  table  of  the  per  capita  supply  of  money 
in  Europe,  Asia,  Africa  and  the  Americas,  including 
coin  and  pa^Der : 

Africa,  per  capita  supply  of  money  about $     .50 

Asia*,    "         "         "         "       "         "      5.00 

Two  Americas"         "         "       "         "      14.00 

Europe,  "  "         "       "         "      17.50 

From  this  the  average  degree  of  civilization  appears 
to  be  highest  in  Europe.  This  is  true.  But  separating 
Great  Britain,  France,  Germany,  and  the  United  States 
from  the  other  states  of  Europe  and  America,  and  com- 
paring their  average  ptr  capita  supply  of  money  for 
the  last  fifty  years  with  that  of  all  other  nations,  they 
stand  out  prominently  at  the  very  head  of  civilization. 
The  conditions  or  states  of  the  people  of  the  four  quar- 
ters of  the  earth,  as  indicated  by  these  money  statistics, 
are  proved  to  be  true  Ijy  existing  facts,  to  learn  which 
one  has  but  to  turn  to  histories,  travels,  newspapers, 
commercial,  industrial,  scientific  and  artistic  reports  of 
nations,  t 

*There  is  a  small  amount  of  paper  money  in  China,  but  the  quan- 
tity is  not  Icnown.  Neither  is  tlio  yield  of  the  Chinese  mines  known. 
There  is  also  paper  money  in  India.  Taking  these  into  considera- 
tion, we  put  the  per  capita  supply  of  money,  coin  and  paper,  of  Asia 
at  $;■).  Wages  are  very  low  in  China;  afoot-soldier's  pay  being 
about  ^3  or  $4  a  month.  This  indicates  a  very  small  supply  of 
money. 

tit  is  proper  to  note  here  the  seeming  paradox,  that  while  the 
amount  of  money  circulating  in  a  nation  indicates  its  degree  of  civ- 
ilization,  the  amount  uu  individual  possesses  is  no  index  to  Ms 


CIVILIZATION  ;    INCREASE    OF    COMMERCE.  143 

The  amount   of    paper  money  in  Europe    and   tlie 
Americas  is  distributed  about  as  follows  : 

Great  Britain $200,000,000 

France 500,000,000 

Germany 200,000,000 

Austria," 290,000,000 

Eussia , 800,000,000 

Italy 300,000,000 

Otlier    States 110,000,000 

Total  in  Europe $1,400,000,000 

United   States 070,000,000 

Canada 25,500,000 

Brazil 1 10,000,000 

Other  S.  American  States 10.000,000 

Grand  total $3,215,500,000* 

The  rapid  increase  of  commerce,  both  foreign  and 
domestic  of  the  civilized  world,  is  shown  by  the  trans- 
actions of  Great  Britain,  France  and  the  United  States. 
Their  aggregate  exports  and  imports  for  each  decade, 
from  1824  to  1874,  were  as  follows  : 

GREAT    BRITAIN. 

1824  to  1834 $  4,046,225,000 

1834  to  1844 0,343,900,000 

1844  to  1854 9,893,215,000 

1854  to  1804 18,019,105,000 

1804  to  1874 28,500,555,000 

desree  of  civilization,  as  rompared  with  that  of  his  fellow-country- 
men. This  is  explained  by  the  very  simple  reason  that  it  is  not  the 
possesswJi  of  money  but  the  circulation  of  it  that  produces  civili- 
zation. 

*  These  tables  are  not  published  as  beinsr  critically  correct,  but 
proximately  They  are  based  on  various  reports  and  the  most  re- 
liable statistics  the  author  could  obtain. 


/ 


144  GOLD,  SILVER  AND  PAPER  MONEY. 

FRANCE. 

1824  to  1834 $  1,913,000,000 

1834  to  1844 2,741,400,000 

1844  to  1854 4,088,000,000 

1854  to  1864 8,327,200,000 

1864  to  1874 12,728,400,000 

UNITED    STATES. 

1824  to  1834 $  1,774,431,168 

1834  to  1844 2,416,579,982 

1844  to  1854 3,543,925,919 

1854  to  1864   6,405,408,519 

1864  to  1874 10,686,772,639 

The  amount  of  the  internal  commerce  of  the  United 

States  is  indicated  by  the  following  table  of  the  New 
York  clearing  house  transactions,  from  1854  to  1877. 

1854 $5,750,455  987         1866 $28,717,146,914 

1855 5,362',912,<i98        1867 28,675.159,472 

1856 6,906,213,328         1868 28  484  288,637 

1857 8'333,226  718         1869 37,407,028  987 

1858 4756,664  386         1870 27,804  539  406 

1859....   6,448  0!5,956         1871 29  300,986  682 

1860 7  231,143,057         1872 32  636  997,404 

1861 5.915,742,758         1873 33,972  773,943 

1862 6,871,443,591         1874 20,850  681963 

1863 14,867  597.849         1875 23,042,276  858 

1864 24,097,196.656         1876 21,597,274  247 

1865 26,032,384,342        1877 2t),876  555  937 

This   table   exhibits  an  increase  of  nearly  400  per 
cent,  in  N.  Y.  clearinirs  since  1854.     We  take  the  trans- 


actions of  the  New  York  clearin":  house  to  be  about  ^ 


of  the  entire  business  of  the  country,  both  urban  and 
rural. 

Upon  this  calculation  it  appears  that  the  total  in- 
ternal business  of  the  United  States  was  about  $28,- 


CIVILIZATION  ;  INCREASE  OF  COMMERCE.  145 

000,000,000  ill   1854  and   $104,000,000,000  in   1877, 
nearly  quadruple  that  of  the  former  year.* 

The  London  clearings  were  as  follows  for  the  years 
named  : 

1868 $15,278,055,000 

1869 17,670,195,000 

1870 18,603,116,000 

1871 20,092,315,000 

1872 26,748,610,000 

187.1 30,016,675,000 

1874 29,970,000,000 

This  indicates  a  doubling  of  commercial  transactions 
in  England  from  1868  to  1874,  when  a  decline  set  in. 
These  tables  of  French,  English  and  United  States 
business  indicate  a  general  and  very  rapid  increase  of 
production  and  business  in  the  whole  civilized  world 
during  the  last  fifty  years.  Money,  giving  full  scope 
and  application  to  man's  powers,  did  it. 

Rome,  the  richest  and  grandest  of  ancient  nations, 

had  $1,800,000,000  of  gold  and  silver,  and  used  paper 

money  during  her  wars  with  Carthagena.     "When  her 

volume  of  money  fell  to  $400,000,000,  decay  brought 

her  downfall.  Venice,  the  richest  and  greatest  com- 
mercial metropolis  of  the  12th  century,  invented  and 

used  a  semi-legal  tender  paper  to  sustain  her  wars  and 
commerce,  and  give  application  to  the  productive  pow- 
ers of  her  people. 

The  invention  and  general  use  of  paper  money  in 

*  It  will  be  noticed  that  the  transactions  of  the  New  York  clear- 
ing house  advauced  to  $37,407,028,987  in  18G9,  indicating  the  in- 
ternal business  of  the  country  for  that  year  to  have  been  about 
f  185,000,000,000,  nearly  85  per  cent,  more  than  for  1877.  This  fall- 
ing off  in  business  is  explained  in  the  great  reduction  of  the  vol- 
ume of  money,  destruction  of  credit  and  the  consequent  fall  of 
prices  and  depression  of  business  since  then. 


14G  GOLD,  SILVER  AND  PAPER  MONEY: 


Europe  during  the  last  200  years,  gave  a  new  impetus 
to  civilization,  and  notably  during  the  last  hundred 
years  Europe  and  America,  finding  coin  totally  inade- 
quate to  develope  and  apply  the  powers  of  man  and 
advance  civilization,  have  doubled  their  money  by  the 
use  of  paper,  thus  sextoupling  their  commerce  and 
elevating  themselves  to  the  highest  degree  of  civiliza- 
tion, wealth  and  glory. 

"Within  the  last  100  years  the  commercial  and  busi- 
ness transactions  of  the  civilized  world  have  needed  an 
increase  of  money  equal  to  the  increase  of  money  of 
all  the  previous  1800  years.  In  spite  of  the  immense 
discoveries  of  gold  and  silver  in  American,  Australian 
and  Russian  mines,  no  such  increase  of  coin  money,  or 
anything  like  it,  has  taken  place  as  was  required  by  the 
necessities  of  trade  and  commerce.  In  the  rapid 
growth  of  industry  throughout  the  civilized  world,  un- 
der the  advance  of  science,  over  70,000,000,000  of 
steam  horse-power  have  been  applied  to  mjaiad  engines, 
multiplying  the  producing  power  of  man  more  than  a 
thousand  fold." — B.  A.  Hiirs  Gold,  Silver  and  Pa/per 
Money. 

With  the  great  increase  of  money  in  the  last  100 
years  has  sprung  from  the  exhaustless  powers  of  man's 
mind  and  muscles,  myriads  of  labor-saving,  wealth- 
producing  and  carrying  machines  and  appliances,  arts 
and  sciences,  and  these  in  turn  have  multiplied  the 
wealth  and  happiness  of  man  a  thousand  fold  in  en- 
lightment,  civilization,  houses,  homes  and  countless  pub- 
lic and  personal  comforts.  These,  in  turn  have  greatly 
multiplied  the  uses  of,  and  man's  demand  for,  money. 

According  to  the  estimates  of  the  best  authorities, 
the  aggregate  products  of  the  world's  gold  and  silver 
mines  have  almost  constantly  diminished  since  1853,  as 
will  ])e  seen  from  tlic  folloAving  table  : 


« 


CIVILIZATION  :  TNCrEASE  OF  COMMEHCfi.  147 

Year     Gold  Products  Silver  Products     Total  Products 

1853 $190,000,000 $45,000,000 $235,000,000 

1854 165  000  000 45,000.000 210,000,000      | 

1855 160,000,000 45,000,000 205,000,000 

1856 158,000,000 45,000,000 203,000,000 

1857 155.000,000 45,000,000 200,000,000 

1858......  150,000,000 45,000,000 105,000,000 

1859 150,000,000 45,000,000 l'.»5.000,000 

1860 148,000,000  50,000  000  198,000,000 

1861 145,000,000 55,000,000 200,000  000 

1862 145.000,000 50,000,000 1.95,000,000 

1863 140,000,000 50  000,000 190,000,000 

1864 140,000,000 55,000,000 195,000.000 

1865 135,000,000 65,000,000 200,000,000 

1866 135.000,000 65,000,000 200,000,000 

1867 131,000,000 60,000,000 191000,000 

1868 130  000,000 60,000,000 190,000  000 

1869 125.000,000 55,000  000 180,000,000 

1870 115,000,000 60.000,000 175,000,000 

1871 110,000,000 65,000,000 175.000,000 

1872 105  000,000 70,000,000 175.000,000 

1873 95  000,000 75,000,000 170,000,000 

1874 87  000,000 80,000.000 107,000,000 

1875 90,000,000 75,000,000 165,000  000 

1876 93  000,000 72,000,000 165,000,000* 

The  gold  and  silver  which  go  to  Asia  aud  Africa 
never  return .  Civilization  is  slowly  but  surely  encroach- 
ing upon  their  benighted  borders,  and  constantly  in- 
creasing their  drafts  upon  Europe  and  America  for  the 
precious  metals.  Europe  and  America  may  not,  there- 
fore, look  to  Asia  and  Africa  for  any  addition  to  their 
stock  of  gold  and  silver,  but  may  rather  expect  that 
shipments  thither %\'ill  increase,  antl ,  perhaps,  still  further 
reduce  their  stock. 

Since  1853  there  has  been  a  decrease  in  the  annual 
products  of  the  gold  and  silver  mines  of  the  world  of 


*  The  products  are  iriven  in  round  numbers  only,  but  approx- 
imate verj-  nearly  the  production  of  the  precious  metals  aud  the  de- 
crease for  the  years  named. 


148  GOLD,  SILVER  AND  PAPER  MONEY. 

about  $70,000,000,  and  since  1866  about  $35,000,000, 
and  during  the  same  time  a  great  increase  in  the  annual 
consumption  of  the  precious  metals  in  the  arts,  so  that 
there  is  now  not  only  no  addition  to  the  stock,  but  an 
annual  diminution  of  it. 

In  1865  and  1866  the  civilized  world's  paper  money 
reached  its  highest  point,  when  it  was  over  $3,500,- 
000,000.  Since  that  date  it  has  been  reduced  several 
hundred  millions,  and  with  its  reduction  has  come  a  uni- 
versal fall  of  prices  in  Europe  and  America.  With  this 
reduction  of  the  world's  supply  of  money  and  decline  of 
prices  have  come  depression  of  business,  bankruptcies, 
riots,  strikes,  crime,  suffering  and  pauperism  to  Ger- 
many, Great  Britain  and  the  United  States,  and  they 
are  the  nations  which  have  reduced  their  supply  of 
money  most,  or  failed  to  increase  it  with  the  mcrease 
of  population. 

Deduced  from  the  foregoing  facts  we  state  the  fol- 
lowing propositions : 

1st.  Money  is  the  power  which  has  enabled  man  to 
produce  the  existing  civilization  and  wealth  of  the  19th 
century. 

2nd.  The  present  stock  of  money,  gold,  silver  and 
paper,  not  only  failing  to  increase  with  the  increase  of 
pojoulation,  but  decreasing  quite  rapidly  in  the  aggre- 
gate, is  insufficient  to  sustain  the  present  degree  of  civ- 
ilization, much  less  advance  it. 

There  is  no  prospect  of  an  increase  of  coin  to  sustain 
the  growing  business  of  the  world.  Therefore,  gov- 
ernments must  issue,  or  cause  to  be  issued,  more  paper 
money  or  suffer  the  dwarfing  of  man's  powers  and  a 
decline  in  all  that  makes  nations  great  and  their  people 
civilized,  prosperous  and  happy. 


CHAPTER   VI. 


BONDS    OF    THE    CIVILIZED    WORLD  : 
NATIONAL,  STATE,  MUNICIPAL    AND    CORPORATE. 

The  conditions  and  accidents  of  the  civilized  world 
during  the  nineteenth  century  have  created  immense 
demands  and  uses  for  money.  War  has  always  been 
expensive,  and  during  the  j^resent  century,  smce  the  in- 
ventive genius  of  man  has  multiplied  and  improved  the 
engines  of  destruction,  the  mean?s  of  transportation  and 
the  comforts  of  the  soldiers,  it  has  been  immensely  ex- 
pensive. Each  war  has  come  to  cost  thousands  of  mil- 
lions of  money. 

The  waring  nations,  on  their  precipitation  into  con- 
flict, found  their  exchequers  insufficient  to  sustain 
armies.  A  resort  was  made  to  semi-money,  credit, 
faith  and  debt — the  offspring  of  civilization.  Thence 
resulted  the  system  of  national  bonded  indebtedness. 
This  became  so  necessary  and  so  convenient  that  nations 
in  order  to  concentrate  into  a  short  conflict  the  ener- 
gies of  years,  mortgaged  the  productive  powers  of  man 
for  generations,  by  issuing  bonds. 

The  great  increase  of  money,  both  coin  and  paper, 
resulting  from  the  discoveries  of  ijold  in  the  Australian 
and  Calif  ornian  mines  in  1848-49  gave  a  tremendous 


150  BONDS  OF  THE  CIVILIZED  WORLD  : 

impulse  to  civilization  aud  caused  it  to  bound  forward 
a  century,  increasing  man's  desires,  tastes,  ambitions 
and  capaljilities  ten-fold  beyond  the  power  of  the  world's 
money  to  sustain  and  satisfy  them.  These  expressed 
themselves  in  government  plans  for  clearing  out  rivers, 
erecting  harbors,  subsidizing  ships  and  railroads,  im- 
provement and  embellishment  of  capitols,  education  of 
the  youth,  military  academies,  asylums  for  the  unfor- 
tunate and  relief  for  the  poor.  The  establishment  and 
support  of  these  civilizing,  beneficent  enterprises  re- 
quired immense  sums  of  money,  to  supply  which  the 
treasuries  of  nations  were  inadequate,  the  world's  money 
insufiicient,  and  a  resort  to  bonded  indebtedness  was 
necessary. 

The  nations  of  the  earth  have  not  alwavs  had  wise 
and  good  rulers.  Hence,  the  frauds  and  profligacies  of 
governments  have  often  exhausted  the  public  treasuries 
and  caused  a  resort  to  the  convenient,  yet  oppressive 
system,  of  selling  government  bonds. 

The  impetus  given  to  nations  since  1849,  has  been 
supplemented,  or  rather  was  caused  by  the  inspiration 
of  individuals.  The  revelation  to  man  of  his  wonder- 
ful capabilities,  aided  by  money,  exalted  his  hopes  and 
extended  his  faith  in  his  powers  far  beyond  their  for- 
mer bounds.  Thence  the}'^  associated  themselves  together 
to  concentrate  money  and  unite  their  energies  in  the 
establishment  of  ships  and  steamboat  lines,  the  building 
of  railroads,  the  opening  of  mines,  the  formation  of  ex- 
press, insurance,  manufacturing,  trading,  banking  and 
other  companies  to  an  unprecedented  extent.  Thence 
grew  up  the  great  corporate  systems,  and  the  ready 
money  at  their  command  ])eing  far  too  small  to  carry 
out   their   vast   designs,  immense   sums  of  corporate 


NATIONAL,  STATE,  MUNICIPAL  AND  CORPORATE.       151 

bonds  were  issued  and  sold  in  the  money  markets  of 
Europe  and  America. 

Following  are  estimates  of  the  national,  state,  mu- 
nicipal and  raiJroad  bonded  indebtedness  of  the  civilized 
world : 

DEBTS  or  GOVERNMENTS. 

Nation  Amount         Year  Amount          Year 

Austria  Iliui'^ary $  625,000,000.  .1848.. f  1,655, 9(J4, 500.. 1875  Dec 

Belgium 123, 798,281..  1844..  185,909,802.  .1873 

Denmark 74, 312,325..  1866..  55,769,055..  1875 

France* 1,000,000,000..  1850..  3, 750,337,006.. 1875  Jau 

Prussia 246,000  000.  .1875   Jan 

Bavaria 86,006, 000..  1855. .  156.685,000.  .1874 

Wurtemburg* 30,000,000.  .1850..  73,500,000.  .1874  May- 
Saxony 3,000,000 

G.Britain  &  Ireland.  3,928,000,000.  .1836..  3,876,000,000.  .1875  Mch 

Greece 25  OOO.OOO.  .18.50..  75,000,000.-1875 

Italy 586,000,000.  .I860. .  1,951 ,500,000.  .1873 

Netherland 386,300  000.. 1874 

Portugal 105,000,000..  1856..  364,000  000.  .1873 

Russia 625,000,000.. 1850..  2.149,900,000.  .1875   Jaa 

Spain* 1,075,000,000.  .1869. .  2,650,000,000.  .1875  June 

Sweden 43, 000,000..  1875 

Norway 8,000,000.. 

Switzerland 6,000,000. . 

Turkey None..  1850..  900,000,000.  1874 

United  States 63,452,773.  .1850.  .12,245,018,579.  .1876  June 

Canada 70,000,000.  .1863..  116,082,917.  .1875  July 

Mexico 317,357,250.. 1865..  395,500,000.  .1874 

Brazil ..1850..  369,294,430.  .1875  June 

Argentine  Republic.  ..1850..  67, 700,000..  1875 June 

Bolivia ..1850..  17,000,000.  .1875 

Chili ..1850..  63,400,000..  1875  Sept 

Colombia ..1850..  75,000,000.  .1873 

Ecuador ..1850..  16,400,000.  .1855 

Guatamala ..1850..  4,400,000.-1875 

Hayti ..1850.  16,000,000.-1875 

Honduras ..1850..  29,700,000- .1875 

*  Estimated. 

rContinued  on  opposite  page.] 


152  BONDS  OF  THE  CIVILIZED  WORLD  : 

Nation                           Amount        Year  Amount       Tear 

India 299,700,000..  1859..  537, 675,000..  1874  Apr 

Egypt. ..1850..  350,000, 000.. 1875 

Japan ..1850..  16  500,000.. 1875 

Colony  of  Good  Hope.  ..1850..  8, 615,000..  1874 

Ceylon ..1850..  3  200,000..  1874 

N.S.Wales ..1850..  54,500,000..  1874 

NewZcaland ..1850..  50  000,000..  1873 

Queensland ..1850..  15,000  000..  1873 

S.Australia ..1850..  17,000,000. .1875 

Victoria ..1850..  60  000,000.  .1875 

Nicaragua ..1850..  9, 500,000.. 1874 

Paraguay ..1850..  24  000,000..  1875 

Peru ..1850..  2.5,750,000.  .1875 

San  Domingo ..1850..  3, 7.50,000..  1875 

Uruguay  ..18.50..  211,785,000.  .1875  Mch 

Venezuela ..1850..  100,000,000.-1875 

Total .^9,032,626,023  $23,439,471,920 

The  increase  of  bonded  debts  has  been  very  rapid 
since  1860.  It  will  be  noticed  that  France,  Ital}'',  Por- 
tugal, Russia,  Spain,  the  United  States,  Austria  and 
India  increased  their  debts  nearly  $10,000,000,000 
between  18(30  and  1875 — an  increase  at  the  rate  of 
nearly  $700,000,000  a  year.  Since  1875  the  war  of 
Russia  and  Turkey  has  caused  an  augmentation  of  the 
debts  of  them  and  the  other  European  States  largely, 
perhaps  $2,000,000,000.  The  famine  in  India;  the 
revolutions  in  Mexico  ;  the  wars  of  the  South  American 
States,  and  the  efforts  of  Spain  to  suppress  the  rebellion 
in  Cuba,  have  added  largely  to  the  bonded  debts  of  those 
nations.  We  think  the  increase  of  the  bonded  debts  of 
the  nations  named  has  been  at  least  $5,000,000,000 
since  1875.  Add  to  this  Mr.  Fawcett's  estimate  and 
the  present   government  bonded  indebtedness  of  the 

t  Tills  includes  non-interest  bearing  debt  and  Pacific  railroad 
bonds. 


NATIONAL,  STATK,  MUNICIl'AL  AND  COKl'ORATE.        153 

nations  named  would  be  about  $28,500,000,000.  Tho 
railroad  debts  of  the  world  were  al)out  $700,000,000  in 
1850  ;  in  18(50,  about  $2,000,000,000  ;  in  1870,  about 
$3,500,000,000,  and  1875  about  $5,000,000,000.  Add 
the  same  ratio  of  increase,  about  8  per  cent,  per  annum j 
since  1875,  and  the  present  (December,  1877)  raih'oad 
bonded  indebtedness  would  be  about  $G, 200, 000, 000. 
State  and  nmnicipal  debts  of  the  world  have  been  esti- 
mated at  about  $4,250,000,000,  up  to  the  year  1876. 
Add  the  same  per  centum  of  increase  as  accrued  in  rail- 
roads, and  the  state  and  nmnicipal  debts  would  stand 
now  (December,  1877)  atabout$5,0t)0,000,000.  Adding 
the  several  items,  it  gives  $39,700,000,000  as  the  present 
national,  state,  nmnicipal  and  railroad  indebtedness  of 
the  civilized  world.  The  outstanding  bonds  of  all  other 
largo  corporations  and  companies  in  Europe  and  America 
added  would  swell  the  bonded  debts  of  the  nations 
named  to  the  gigantic  sum  of  over  $40,000,000,000. 
This  vast  sum  of  interest-bearing  obligations  is  held 
principally  in  Europe  and  America ,  constituting  the 
property  of  that  class  of  men  called  the  "money 
power." 

This  immense  sum  is  four  times  the  actual  money 
values  of  all  property  in  the  United  States,  and  nearly 
five  times  the  aggregate  sum  of  money,  l)olh  coin 
and  paper,  in  the  whole  world.  The  interest  on 
it,  about  $2, 000, 000, 000 ^cr  annum,  consumes  the  sur- 
plus products,  the  profits  of  the  debtor  nations.  These 
bonds,  born  of  necessity  and  extravagance,  have,  in  a 
measure,  served  the  purposes  of  money,  and  in  that 
way  have  done  the  world  nmch  good.  But  they  have 
grown  to  such  enormous  proportions  that  they  threaten 
whole  nations  with  bankruptcy.      So  long  as  the  vol- 


154  BONDS  OF  THE  CIVILIZED    WOELD  : 

ume  of  money  (the  aggregate  of  coin  and  paper)  kept 
pace  in  increase  with  the  constantly  developing  powers 
of  man  and  the  increasing  uses  for  money,  the  money 
power  on  the  one  side,  and  commerce,  the  industries 
and  labor  on  the  other  side,  were  not  enemies.  The 
bonded  indebtedness  of  the  world  was  not  felt  as  a  bur- 
den, because  the  increasing  production,  the  profits  of 
business  and  the  supply  of  money  pro\aded  the  means 
of  paying  the  interest  and  principal  of  the  bonds 
with  comparative  ease.  But  when  the  increase  of  the 
world's  supply  of  money  was  stopped  a  few  years  ago 
and  the  policy  of  reducing  the  volume  was  begun,  a 
universal  decline  of  prices  of  property  in  Europe  and 
America  set  in,  then  those  bonds  began  to  be  a  burden 
to  the  people,  because  the  means  of  bearing  them  up, 
money,  was  reduced. 

The  money  power  and  the  people  found  that  as  the 
volume  of  money  was  reduced,  prices  fell  and  the  pur- 
chasing power  of  the  annual  interest  on  bonds  rapidly 
increased,  thus  greatly  increasing  the  riches  of  bond- 
holders, while  the  wealth  of  the  people  Mas  corres- 
pondingly reduced.  At  this  point  enmity  sprang  up 
between  the  money  power  on  the  one  hand,  and  the 
people  and  all  their  interests  on  the  other.  As  time 
passed  on,  the  interests,  sympathies  and  feelings  of  the 
two  classes  diverged  wider  and  wider  apart,  until  it 
came  to  wars  of  words  and  diplomacy  with  governments 
and  ill  the  legislative  halls  of  the  nations,  the  money 
power  pressing  for  the  cheapening  system  and  dearer 
money,  and  the  people  resisting,  until  finally,  in  the 
United  States,  the  contest  threatens  the  destruction  of 
))onds  or  the  i)ayment  of  them  in  cheap  money  if  the 
people  triumph,  or  the  destruction  of  the  commercial 


NATIONAL,  STATE,  MUNICIPAL  AND  CORPORATE.       155 

wealth  of  the  nation,  the  pauperization  of  labor,  and, 
perhaps,  revolution  if  the  policies  of  the  money  power 
prevail. 

Such  is  the  condition  of  the  United  States  and  such 
will  be  the  condition  of  every  nation  bearing  a  heavy 
load  of  l)onded  debts,  unless  the  overshadowing  influence 
of  the  money  poAver  cease  to  make  governments  their 
fiscal  agents  and  engines  of  oppression  against  the 
l^eople.  These  are  matters  of  great  solicitude  to  every 
lover  of  his  country,  and  unless  wise  counsels  and 
equitable  financial  measures  prevail,  the  worst  appre- 
hensions ^y\\\  inevitably  be  realized  facts,  soon  or  late, 
in  national  decline,  increased  pauperism  and  crime, 
riots,  insurrections  and  revolutions.  Extrication  from 
this  fearful  dilemma  of  repudiation  on  the  one  hand, 
and  revolution  on  the  other,  lies  only  in  a  judicious  in- 
crease of  money  so  that  the  amount  of  money  shall  be 
commensurate  with  the  people's  needs  of  it.  Such  an 
increase  must  be  of  paper  money,  because  the  stock 
and  products  of  gold  and  silver  are  utterly  inadequate 
to  serve  the  commercial  needs  of  the  world  in  the  pres- 
ent advanced  state  of  civilization  and  under  the  existing 
debt-burdened  conditions  of  men  and  nations. 


CHAPTER  Vn. 


THE   MONEY   POWER  ;     ITS    POLICY   AND    INFLUENCE. 

This  is  that  class  of  men  who  own  the  interest-bear- 
ing bonded  debts  of  the  world,  mentioned  in  another 
chapter.  The  greed,  the  unwise  policies,  the  arog- 
ance,  the  cheapening  system  of  this  power  have  made 
it,  unconsciously  may  be,  the  enemy  of  every  material 
general  interest  of  human  society,  the  enemy  of  civil- 
ization. The  interests  of  all  the  industrial,  commercial, 
laboring,  scientific  and  professional  classes  are  natur- 
ally identical,  and  wherever  they  differ,  it  is  local,  par- 
tial and  forced  by  bad  laws  or  bad  policy. 

There  are  some  so  simple  as  to  imagine  that  property 
owners,  the  wealth v,  are  the  natural  enemies  of  the 
laboring  classes.  This  is  not  true.  Labor  and  pro- 
perty are  natural  friends.  Not  even  railroads  and 
exchange  and  deposit  banks  are  in  their  nature  objects 
and  ends  at  variance  with  the  rights  and  interests  of 
labor,  and  where  a  conflict  arises  between  these  institu- 
tions and  the  interests  of  the  people,  it  is  the  result  of 
a  subversion  of  the  uses,  objects  and  ends  of  the 
former. 

But,  the  interests  of  the  "money  power"  lie,  or,  at 
least  they  think  they  lie,  antagonistic  to  all  the  other 
money  interests  of  society  ;  hence,  has  sprung  up  a  bit- 
ter warfare  between  the  money  power  and  the  people. 


ITS  POLICY  AND  INFLUENCE.  157 

Governments,  in  their  folly,  have  mortgaged  the  brain, 
muscle  and  property  of  the  people  to  the  bond-holders 
for  years,  and  the  hitter,  of  that  folly  bom  of  avarice, 
use  the  power  placed  in  their  hands  in  influencing  gov- 
eniracnts  to  pursue  iinancial  policies  oppressive  on  the 
people. 

The  country  need  not  look  to  the  money  power  for 
relief,  for,  although  thousands  of  that  class  of  capital- 
ists are,  in  feeling  and  impulses,  the  friends  of  the 
masses,  yet  the  money  power  of  the  world,  in  its  mea- 
sures and  financial  operations,  is  a  monster  to  be 
dreaded  by  the  masses.  It  is  the  nightmare  of  the  age, 
riding  with  supreme  indifference  upon  the  galled  backs 
of  a  weary  and  heavy  laden  people.  It  is  as  a  leech,  a 
huge  vampvr  on  the  body  politic,  sucking  up  the  sub- 
stance of  the  nations.  Much  has  been  said  of  it. 
People  heap  denunciations  upon  it  without  ha\'ing  any 
true  conception  of  its  vast  powci',  of  controling  influ- 
ence in  the  affairs  of  the  world.  It  cTwns  the  public 
indebtedness  of  Europe  and  America,  air^refjatinij  the 
enormous  sum  of  $40,000,000,000,  and  its  measures 
are  directed  by  the  most  skillful  financiers  of  the 
world,  with  headquarters  in  all  the  financial  centers. 
A  great  part  of  this  sum  is  free  from  taxes,  and  the 
annual  interest  on  it,  wruns;  from  the  toil  and  sweat  of 
the  millions,  is  about  $2,000,000,000. 

It  is  cosmopolitan  w'ith  reference  to  country.  It  has 
no  country,  no  patriotism  above  pelf.  Hence,  it  wants 
a  "universal  standard  of  values,"  a  "uniform  money  of 
the  world,"  regardless  of  the  interests  of  the  people. 
Its  annual  income  is  fixed  by  the  rate  of  interest  on  its 
bonds,  hence,  self-interest — sheer  Shvlockism,  prompts 
it  to  exclaim,  "too  much  currency!'"    "a  plethora  of 


158  THE  MONEY  POWER  : 

money  !"  and  urge 'resumption  of  specie  payments,  so 
as  to  make  money  scarce  and  dear,  and  property  and 
wages  low,  insuring  greater  gains  for  itself.  Its  power 
operating  through  governments  demonetized  silver  in 
Enahind  in  1816  ;  demonetized  gold  in  Germany  in 
1857,  and  in  1871  demonetized  silver  and  remonetized 
irold  there,  and  restricted  the  further  coinage  of  silver 
in  France  and  other  smaller  European  states.  It  pro- 
cured the  passage  of  the  infamous  act  of  Congress  of 
1869,  in  the  United  States,  making  the  bonds,  which 
were  payable  in  "Greenbacks,"  payable  in  coin,  de- 
monetized silver  in  1873,  and  procured  the  passage  of 
the  resumption  act  in  1875.  All  this  has  been  done  at 
the  instance  of  the  money  power  to  make  money  scarce 
and  high  for  its  enrichment. 

It  is  a  shrewd  and  cunning  diplomatist,  finding  its  way 
into  all  places  of  power,  and  by  its  money  or  l)landish- 
ments  turns  the  destiny  of  nations  and  fixes  the  fate  of 
the  people. 

It  dictates  to  thrones,  arms  nations  for  war,  or  in- 
duces peace  ;  enthrones  monarchs,  elects  high  officers, 
and  turns  the  tide  of  political  success  or  defeat  where 
it  will.  It  is  the  god  of  mammon,  whom  the  people 
serve  under  protest.  It  regards  the  people  as  a  com- 
mon herd,  to  be  tolerated  only  because  they  are  useful 
to  pay  interest  and  to  do  the  drudgery  of  nations.  It 
subsidizes  the  press  and  corrupts  the  officers  of  govern- 
ment. It  bribes  legislators  to  betray  their  sacred 
trusts,  and  wins  executive  officers  of  state  by  its 
seductive  flattery.  It  ramifies  all  through  civilized 
society,  insidiously  instills  its  fallacious  logic  into  the 
minds  of  the  unwary,  and  makes  auxiliaries  of  millions 
whom  its  measures  are  destined  to  destroy. 


ITS  POLICY  AND  IXFLUEXCE.  159 

Holy  writ  informs  us  that  "the  love  of  money  is  the 
root  of  all  evil."  The  history  of  nations  proves  this 
to  be  a  great  truth.  The  inordinate  greed  of  the  money 
power  has  caused  the  nations  of  the  earth  more  misery 
and  wretchedness  than  famine  and  pestilence.  By  its 
skillful  manipulation  of  law-making  powers  and  secur- 
ing monetary  i)olicies  detrimental  to  commerce  and  pro- 
duction, it  has  entailed  upon  nations  the  blighting 
effects  of  declining  markets,  ruined  industries, 
pauperization  of  labor,  riots,  strikes  and  insurrections. 

Year  bv  vear  the  strcnirth  and  influence  of  this 
power  grows.  The  suffering  conditions  of  the  people 
eloquently  petition  for  relief.  But  petitions  avail 
nothing.  A  desperate  conflict  will  be  fought.  Let  it 
be  an  ideal  one  only.  The  money  power  will  be  over- 
come and  the  people  will  free  themselves  from  unjust 
monetary  laws.  Let  their  efforts  be  founded  in  wis- 
dom and  tempered  -with  moderation.  Action,  vigi- 
lence  and  wise  counsels  are  indispensible  to  relief.  The 
sooner  this  fact  is  realized  and  acted  upon,  the  better 
it  will  be  for  all  concerned,  because,  if  deferred  too 
long,  the  masses  might  be  goaded  to  desperation  and 
turn  and  tear  in  pieces  not  only  their  real,  but  imagin- 
ary enemies,  as  the  oppressed  French  did  in  the  revo- 
lution of  1789.  Such  would  be  deplorable.  Let  the 
conflict  take  place  now  while  it  may  be  done  peacefully, 
lawfully,  by  reason  and  the  silent  force  of  the  ballot. 
All  patriots  would  deplore  insurrections,  riots,  revolu- 
tion. No  honest  man  can  desire  repudiation  of  lawful 
obligations,  because  such  would  be  not  only  unjust,  but 
would  cover  the  nation  with  disgrace.  All  lovers  of 
their  country,  of  liberty  and  justice  will  hope  and  labor 
for  such  measures,  such  monetarv  laws  as  will  enable 


160  THE  MONEY  TOWER. 

the  country  to  pay  its  obligations  with  as  little  suffer- 
ing and  injustice  as  possible.  Payment  of  every 
farthinc:  of  just  obliirutions  oui?ht  to  be  made  and  v.ill 
be  practicable,  easy  and  cheerfully  discharged  by  the 
people  if  the  government  will  onh'  make  it  possible  for 
them  to  do  it  by  supplying  them  with  suincieut  money. 


CHAPTER  Vm. 


GOLD  AND  SILVER  :  PRODUCT  IN  THE  UNITED  STATES. 

The  Secretary  of  the  United  States  Treasury,  in  his 
report  dated  December  7th,  1874,  estimated  the  aggre- 
gate amount  of  gold  and  silver  in  the  country  at  a])out 
$106,000,000.  In  that  report  the  Secretary  took 
occasion  to  congratuhite  the  country  upon  the  gro^vth 
of  the  stock  of  specie.  That  Secretary  and  his  succes- 
sors have  been  ardent  advocates  of  specie  payment 
and  have  embraced  every  opportunity  to  show  to  the 
country  the  practicability  of  resumption.  While  the 
Secretaries  of  the  Treasury  have,  since  1874,  referred 
to  resumption  in  hopeful  terms,  there  has  been  a 
marked  silence  in  their  reports  about  the  amount  of 
specie  in  the  country.  No  direct  assurances  are  given 
by  them  of  an  increase  of  the  stock.  Inasmuch  as 
specie  resumption  depends  absolutely  on  the  amount  of 
gold  and  silver  in  the  country,  it  is  but  just  to  conclude 
that  if  there  had  been  any  noteworthy  increase  in  the 
stock,  the  Secix^tarics  would  have  so  stated  in  tlueir 
reports,  in  order  to  give  strength  to  the  policy  of 
resumption,  and  assurance  to  the  people.  It  is  very 
questionable  whether  there  has  been  an  increase  that 
can  be  called  permanent. 

The  Director  of  the  Mint  has  constantly  endeavored 


162  GOLD  AND  SILVER  ; 

to  show  an  increase  of  specie.  He  estimated  the  total 
stock  of  the  precious  metals  in  the  country  on  the  30th 
day  of  June,  for  the  years  named  below,  as  follows : 
1873,  at  $140,000,000;  1874,  at  $166,846,224  ;  1875, 
at  $167,614,803  ;  1876,  at  $181,678,000  ;  1877,  at  $242,- 
355,858  ;  on  31st  day  of  October,  1877,  at  $235,000,- 
000.  To  produce  the  estimate  of  $166,846,224,  June 
30th,  1874,  he  adds  to  the  amount  estimated  for  1873, 
two  years  products  of  the  mines,  estimated  by  him  at 
$70,000,000  per  annum,  and  deducts  the  excess  of 
exports  over  imports.  To  obtain  the  estimate  of  $167,- 
614,803,  June  30th,  1875,  he  adds  to  the  amount  esti- 
mated for  1874,  the  products  of  the  mines,  estimated 
by  him  at  $72,000,000,  and  deducts  the  excess  of  ex- 
ports over  imports.  To  obtain  the  estimate  of  $181,- 
678,000  on  June  30th,  1876,  he  adds  to  the  amount 
estimated  for  1875,  the  products  of  the  mines,  which  he 
estimates  at  $85,250,000,  and  deducts  the  excess  of 
exports  over  imports,  and  $5,000,000  for  gold  and  silver 
used  in  the  arts. 

An  examination  of  these  reports  with  others  reveals 
the  fact  that  the  estimates  are  very  loosely  made  and 
unreliable. 

1st.  His  estimate  of  the  amount  of  gold  and  silver 
consumed  annually  in  the  United  States  in  manu- 
factures and  arts  is  not  more  than  one-fourth  the  actual 
amount  so  used,  and  for  1874-5  he  makes  no  allowance 
at  all  for  the  use  of  the  precious  metals  in  the  arts. 
W.  L.  Fawcett,  a  reliable  statistician  (See  Gold  and 
JDeht,  page  107)  reports,  after  critical  estimates,  the 
amount  of  gold  used  in  the  arts  in  the  United  States  to 
be  at  least  $10,000,000  a  year.  The  Monetary  Com- 
mission report  the  use  of  $10,000,000  of  silver  annually 


rRODUCT  IX  THE  UNITED  STATES.  163 

in  the    arts.         See   Report   to    Congress  for    1877, 
page  83.) 

2nd.  The  estimates  of  the  Mint  Director  of  the 
annual  products  of  the  gold  and  silver  mines  of  the 
United  States  are  too  hiijh  by  manv  millions.  He  re- 
ports  them  for  the  years  ending  June  30th,  1873,  at 
$70,000,000  ;  1874,  at  $70,000^000  :  1875,  at  $72,000,- 
000;  1876,  at  $85,250,000;  1877,  at  $82,000,000. 
The  facts  upon  which  he  makes  these  estimates  are  not 
given  in  his  reports.  The  face  of  his  reports  does  not 
sustain  his  estimates. 

He  reports  the  net  dejDosits  and  purchases  at  the 
mints  to  be  as  follows  :  For  the  year  ending  June 
30th,  1874,  $60,627,188;  1875,  $54,626,920^1876, 
$66,517,837. 

We  believe  the  amounts  of  net  deposits  and  pur- 
chases at  the  mints  annually  represent  more  nearly  the 
products  of  the  mines  than  the  Director's  estimate, 
because  every  ounce  of  the  precious  metals  must  pass 
through  the  mints  before  it  can  enter  into  the  fiscal 
operations  of  the  country.  But  even  these  may  far 
exceed  the  actual  products  of  the  mines,  because  eveiy 
deposit  is  reported,  and  every  year  some  portions  of  the 
dei3osits  are  of  old  coins  or  bars. 

The  country  cannot,  therefore,  safely  rely  upon  the 
Mint  Director's  estimates  of  the  annual  products  of 
the  precious  metals  from  the  mines.  Resort  must  be 
had  to  other  sources.  The  means  of  estimatinir  the 
stock  of  the  precious  metals  and  the  annual  productions 
of  the  mines  are  so  unreliable  that  all  the  estimates, 
and  they  are  many,  are  merely  approximations,  resting 
in  some  part  upon  h}^3otheses  and  assumptions.  We 
give  Mr.  Raymond's  estimate  of  the  gold  products  for 


164  GOLD  AND  SILVER  : 

certain  years  ;  Mr.  Fawcett's  estimate  of  the  stock  of 
gold  and  silver  in  the  country  ;  the  Monetary  Commis- 
sion's estimate  of  silver  products,  and  a  table  of  our  own. 

R.  "VV.  Raymond,  United  States  Commissioner  of 
IVIining  Statistics,  in  his  report  for  the  year  1874,  esti- 
mated the  total  gold  product  of  the  United  States  and 
Territories  for  that  year  at  about  $26,358,776.  The 
Monetary  Commission  (See  Report,  page  3)  estimate 
the  total  products  of  the  silver  mines  in  the  United 
States  and  Territories,  for  1874,  at  $26,000,000.  The 
total  products  of  both  gold  and  silver  mines  added, 
make  $52,358,776  for  that  year,  $17,642,000  less  than 
the  Mint  Director's  estimate.  The  estimates  of  Mr. 
Raymond  and  the  Monetary  Commission  are  the  more 
reliable  because  it  was  their  special  business  to  ascer- 
tain, as  nearly  as  possible,  the  products  of  the  mines, 
and  such  was  not  the  duty  of  the  Mint  Director. 

The  gold  products  of  the  mines  in  this  country  have 
been  decreasing  since  1867.  For  that  year  they  were 
$56,725,000  ;  in  1872  they  were  $36,000,000,  and  in 
1874  only  $26,358,776. 

No  new  mines  have  been  discovered  sir.ce  1874  to 
add  any  considerable  mcrease  to  the  gold  products. 
Taking  this  estimate  of  gold  by  Mr.  Raymond,  and  of 
silver  b}'^  the  Monetary  Commission,  as  correct,  we  have 
an  annual  average  product  of  both  metals  of  $52,358,- 
776  up  to  and  including  1875.  The  products  of  silver 
in  1876  and  1877,  resulting  .from  increased  yields  of 
the  rich  mines  in  Nevada,  amounted  to  about  $38, 500,- 
000.  Add  this  to  the  estimated  gold  product,  and  we 
have  an  annual  product  of  both  metals  of  about  $64,- 
000,000  for  1876  and  onward.  This  is  about  $20,000,- 
000  less  than  the  estimate  of  the  mint  director. 


PRODUCT  IX  THE  UNITED  STATES.  165 

3d.  In  his  estimate  of  the  stock  of  coin  in  the  country 
in  1875,  he  d3da;.'ts  $10,030,003  as  probable  over-estim- 
ate. This  shows  a  want  of  reliable  data  on  his  part. 
It  Avould  have  l)een  as  easy,  perhaps,  for  him  to  have 
deducted  $50,000,000  for  over-estimate ,  and  it  is 
probable  that  this  sum  would  have  been  nearer  the  pro- 
per deduction 

4th.  The  mint  director's  estimates  of  the  annual 
products  of  the  mines  being  erroneous,  his  conclusions 
about  the  stock  of  gold  and  silver  in  the  U.  S.  are  also 
erroneous,  because  they  are  partly  based  on  those 
estimates. 

Mr.  W.  L.  Fawcett  has  estimated   the  coin  in  the 

country  as  follows  :     (See  Gold  and  Debt.    ) 

1S70 SrJl,000  000  1874 SllO.000,000 

1871 110,000,000  1S75 100,000,000 

1S72   102,000,000  1876 102,000,000 

1873 100,000,000 

Of  which  he  estimates  the  followin2:  sums  as  beins: 
in  the  U.  S.  treasury  on  the  years  named  : 

18G9 §108,800,000  1873 §80,300,000 

1870 Ot>,000,000  1875 67,833,316 

1871   90,500,000  1876 73,625,584 

1872 78,000,000 

For  1877  the  amount  of  gold  and  silver  in  the  U.  S. 
treasury,  owned  by  tjie  government,  ranged  from 
seventy  to  eighty  millions  dollars.  The  amounts  re- 
ported in  excess  of  these  sums  consisted  of  coin  certi- 
ficates (which  are  not  coin),  and  Sjiecial  deposits  by 
banks  and  individuals. 

By  reference  to  the  Finance  Report  for  1870,  page 
165,  a  table  of  the  specie  held  by  all  the  National 
banks  from  1868  to  1876  Avill  be  seen.  Under  the 
head  "Held  by  National  banks  in  New  York  City," 


166  GOLD  AND  SILVER  : 

is  a  column  of  "Coin,"  which  shows  the  actual  amount 
of  coin  held  by  those  banks  during  those  years  to  have 
been  about  $1,800,000  on  an  average. 

The  next  column  to  the  right,  in  that  table,  shows 
the  amount  of  coin  certificates  held  at  the  same  time. 
Those  certificates  are  reported  as  specie,  but  are  not, 
and  should  not  be  counted  in  estimating;  the  amount  of 
specie  in  the  country.  On  an  average,  the  specie  of 
the  New  York  banks  was  about  one-seventh  of  the 
amount  of  coin  certificates.  In  another  column  of  the 
table,  headed  "Held  by  other  National  banks,"  is  a 
report  of  the  amount  of  specie  and  coin  certificates  to- 
gether, held  by  all  other  National  banks  in  the  U.  S. 
Taking  the  same  proportion  of  specie  to  coin  certifi- 
cates for  these  banks  as  that  in  the  New  York  banks, 
the  amount  of  coin  in  them  averaged  about  $850,000 
a  year.  Then,  all  the  National  banks  held  in  specie, 
from  1868  to  1876,  on  an  average,  about  $2,650,000. 
In  Oct.,  1877,  the  amount  held  by  National  banks  was 
about  the  same  as  in  1876.  Allowing  $3,000,000  for 
all  banks  of  the  Pacific  States,  and  $1,000,000  for  all 
others,  we  have  about  $6,650,000  as  the  amount  of 
specie  actuallj^  held  by  all  banks  in  the  United  States 
from  1868  to  1877.  Making  the  liberal  allowance  of 
$10  in  specie  ^jer  capita  for  the  1,500,000  inhabitants 
of  California,  Nevada,  Oregon,  Arizona,  Colorado, 
Idaho,  Montana,  New  Mexico,  Utah,  Washington  and 
Wyoming,  we  have  $15,000,000  coin  in  circulation  in 
the  Pacific  States  and  Territories. 

Our  foreigii  commercial  balances  and  interest  paid 
to  foreign  capitalists  exert  a  strong  influence  upon  our 
stock  of  coin. 


PRODUCT  IX  THE  UNITED  STATES. 


167 


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168  GOLD  AND  SILVER  .* 

A  portion  of  the  balance  in  favor  of  this  country  for 
the  last  two  years,  was  doubtless  settled  with  our  own 
corporation,  state,  municipal  and  government  bonds. 
How  much  was  so  settled  I  have  no  means  of  knowing, 
but  it  must  have  been  a  small  amount  compared  Avith 
the  total  balance.  The  rest  of  the  balance  was  paid  as 
interest  on  the  indebtedness  of  the  country  held  by 
foreign  capitalists.  How  much  was  thus  paid  we  can- 
not ascertain  definitely.  The  amount  of  our  state, 
municipal,  government  and  corporation  bonds  held  by 
foreign  capitalists  has  been  variously  estimated  at  from 
$1,500,000,000  to  $3,000,000,000.  The  Monetary 
Commission  estimated  it  at  not  less  than  $2,250,000,- 
000.  (See  Report,  page  101).  We  take  a  medium 
amount,  $2,250,000,000.  The  interest  on  this  sum 
will  average  about  6  per  cent,  per  annum,  making 
$135,000,000  interest  that  must  be  paid  by  this  countrj'- 
annually  to  foreign  capitalists.  Unless  it  can  be  shown 
that  more  of  our  foreign  balances  for  1877  than  $18,- 
744,921  were  paid  us  in  bonds,  or  in  something  not 
reported  in  the  Commercial  Reports,  then,  the  conclu- 
sion is  irresistible,  that  the  difference  between  this  sum 
and  our  net  foreign  exi^orts  over  imports,  $135,000,000, 
was  paid  as  interest  on  bonds  to  foreign  capitalists. 
We  take  $135,000,000  as  the  annual  interest  this 
country  now  pays  to  foreign  countries. 

Taking  the  mint  director's  estimate  of  the  total 
stock  of  the  precious  metals  in  1872  at  $128,000,000  as 
a  starting  point,  then  the  estimated  products  of  the 
mines,  and  the  net  amount  brought  in  by  immigrants,* 
and  adding  them  together,  and  deducting  therefrom 
$20,000,000  used  annually  in  arts   and  the  excess  of 

♦The  net  excess  of  the  precious  metals  brought  into  the  country 


rUODUCT  IN  THE  UNITED  STATES.  169 

exports  over  imports,  the  stock  of  precious  metals 
would  stand  about  as  follows  for  the  years  named : 

Year  Stock  Year  Stock 

1872 $121,000,000  1S7G $123,000,000 

1873 113,000,0(10  1877 160,000,000 

1874 120,000,000  1877 152,000,000  Oct.31 

1873 111,000,000 

Under  (he  existing  circumstances,  can  our  stock  of  coin 
increase? 

According  to  the  Mint  Director's  report  for  Oct.  31st, 
1877,  as  compared  with  his  report  for  June  30th,  1877, 
both  the  products  of  the  mines  and  the  stock  of  specie  in 
the  country  have  declined  during  this  year.  He  reports 
the  products  of  the  mines  for  the  year  ending  June  30th, 
1877,  at  $3,250,000  less  than  for  the  preceding  year; 
and  the  entire  stock  of  precious  metals  in  the  U.  S. 
$7,885,888  less  on  the  31st  day  of  Oct.,  1877,  than  on 
the  30th  day  of  June  of  the  same  year.  A  decline  at 
the  rate  of  about  $23,000,000  a  year.  This  indicates 
an  excess  of  forei<>;n  interest  aijainst  us  over  our  foreign 
balances  and  the  supply  of  the  precious  metals  from 
all  sources.     Our  only  means  of  paying  foreign  interest 

and  accumulating  a  stock  of  coin  in  the  country  are  the 
products  of  our  mines,  foreign  balances,  import  duties, 
and  immigration.  Commerce  is  but  traffic,  and  we 
may  not  expect  our  balances  tp  run  up  into  hundreds  of 
millions  Ions:  at  a  time. 

The  great  net  balance  of  $138,000,000  in  favor  of  the 

by  immigrants  over  that  taken  out  by  emigrants  stands  about  as  fol- 
lows tor  the  years  named : 

Year  Amount  Year  Amount 

1 8(ii1 $23,868,000  1 873 $23,831,000 

1870 22  440,0' "0  1874 11,424,000 

1871 22,100,000  1875 8,160,000 

1872 26,656,000  And  for  1876  and  1877  a 

further  decline. 


170  GOLD  AXD  silver: 

U.  S.  for  the  year  ending  June  30th,  1877,  was  produced 
by  special  and  temporary  causes.  The  war  between  Rus- 
sia and  Turkey  gave  us  a  greatly  increased  market  for 
munitions  of  war.     The  famine  in  India  also  contri1>uted 

very  largely  to  the  increased  foreign  demand  for  our  pro- 
visions.    $50,000,000  may  be  safely  estimated  as  the 

amount  of  extra  drafts  upon  our  industries  produced  by 
these  causes  ;  and  when  they  cease  to  exist  we  may  look 
for  a  corresponding  decline  in  the  next  j^ear's  balances  in 
our  favor.  Besides  this,  an  era  of  tight  times  is  ap- 
proaching Europe.  It  is  now  being  felt  in  England  and 
Prussia.  Soon  France  will  resume  specie  payments. 
Then  the  competition  for  foreign  trade  and  for  coin  will 
be  doubled  in  intensity  ;  our  customers  will  be  reduced 
in  ability  to  buy,  and  we  may  expect  our  foreign  bal- 
ances to  correspondingly  decline. 

Taking  a  comprehensive  as  well  as  an  analytic  view 
of  the  situation,  we  think  that  under  the  most  favorable 
laws  and  wisest  management  we  may  not  expect  our 
foreign  balances  to  be  large  for  years  to  come,  except- 
ing, perhaps,  1878.  And,  if  the  universal  fall  of  prices 
continues,  the  probability  is  that  we  will  have  no  large 
foreign  balances,  except  in  case  of  failure  of  crops  in 
Europe  or  some  other  very  exceptional  circumstance. 
Whatever  balances  may  accrue  in  our  favor  a\411  be  paid 
to  the  exi:)orters  in  our  own  bonds  ;  but  this  would  not 
directly  increase  our  stock  of  coin.  If  our  past  commer- 
cial history  be  any  index  to  the  future,  we  may  expect  the 
foreign  balances  to  be  generally  against  us.  IVe  may 
exjjcct  in  the  future,  as  in  the  past,  that  the  total  com- 
mercial footings  of  every  decade  will  show  foreign  l)al- 
anccs  ajrainst  us,  iiicludin2:  our  foreisjn  interest.  Two 
other  sources  of  the  sui)ply  of  the  precious  metals  are 


PRODUCT  IN  THE  UNITED  STATES.  171 

diminishing.  They  are  custom  receipts  and  immigra- 
tion. The  custom  receipts  from  1874  to  1877  are  re- 
ported as  follows : 

1874 $163,103,833 

1875 157,107,722 

187G 148,071,984 

1877 130,956,493 

A  gradual  decline  to  1876,  and  a  great  decline  of 
$17,115,491  for  1877. 

The  number  of  immigrants  who  arrived  in  this  coun- 
try in  1873  was  459,803  ;  the  number  has  rapidly  do- 
creased  since.  For  the  year  ending  June  30th,  1876, 
they  were  only  169,986,  a  falling  off  of  289,817.  Dur- 
ing the  same  period  the  number  of  emigrants  from  the 
U.  S.  has  increased  5,713.  In  1854  the  immigrants 
arriving  brought  on  an  average  $68  in  cash  per  capita. 
Estimating  the  amount  brought  in  by  the  immigrants 
and  taken  out  by  the  emigrants  between  1873  and  1876 
at  the  same,  we  have  a  decline  in  our  metal  supply 
from  that  source  of  over  $20,000,000  per  annum.  Be- 
sides this,  whatever  proportion  of  the  $17,000,000  de- 
cline in  customs  might  have  been  foreign  coin  should  be 
added.  This  offsets  the  increased  products  of  the  mines 
and  assists  in  accounting  for  the  failure  to  materially  in- 
crease the  stock  of  precious  metals. 

The  problem  for  this  country  to  solve  is,  how  can 
we  resume  specie  payments  in  the  face  of  $25,000,000,- 
000  indebtedness  and  $135,000,000  foreign  annual  in- 
terest to  pay  ?  Our  supply  of  the  pre(;ious  metals  from 
immigration  and  custom  dues  is  declining  rapidly. 
The  products  of  the  mines  and  the  stock  in  the  country 
have  shown  a  decline  in  1877,  as  stated  by  the  Director 
of  the  Mint.     Our  past  commercial  history  shows  that 


172  GOLD  AXD  SIL^'ER  : 

we  cannot  hope  for  foreign  balances  in  our  favor  to 
continue  long  at  a  time.  From  1854  to  1860,  when  the 
products  of  our  mines  were  as  great  as  now,  and  when 
the  country  owed  no  foreign  interest,  the  utmost  store 
of  gold  and  silver  that  could  be  kept  in  the  country 
was  from  $200,000,000  to  $275,000,000.  We  may  not 
now  expect  to  keep  so  much  at  home  with  an  annual 
foreign  interest  of  $135,000,000  to  pay. 

The  circumstances  under  which  the  country  labors 
appear  to  make  it  utterly  impossible  to  accumulate  a 
greater  stock  of  coin  than  $200,000,000,  Avithout  a  suf- 
ficient reduction  of  the  volume  of  paper  money  now 
outstanding,  to  reduce  values  so  far  below  European 
prices  as  to  induce  very  heavy  exports.  This  could  be 
done  if  it  were  not  for  the  fact  that  such  destruction  of 
values  would  destroy  business,  ruin  production,  and 
render  a  heavy  commerce  impossible.  A  considerable 
increase  of  the  stock  of  coin  in  the  country  is  impos- 
sible under  existing  conditions  for  some  years  to  come. 


CHAPTEPw  IX. 


THE    AMOUNT    OF    MONEY    NEEDED : 
FIFTEEN    HUNDRED    IVULLIONS. 

In  order  to  make  an  estimate  it  will  be  necessary  to 
begin  with  some  period  of  time,  compare  the  uses  for 
money  then  and  now,  and  add  to  the  sum  of  money  we 
then  had,  an  increase  equal  to  the  increased  uses  for 
money  now  over  that  time. 

We  take  the  year  1859  for  comparison,  as  one 
against  which  no  one  can  exclaim  :  A  year  of  inflation  ! 
The  population  was  then  about  30,000,000.  The  ag- 
gregate sum  of  exports  and  imports,  exclusive  of  gold 
and  silver,  Avas  about  $030,000,000— about  $20  per  cap- 
ita of  the  population.  The  aggregate  sum  of  gold  and 
silver  and  paper  money  was  about  $468,000,000  ;  about 
$15x\  per  capita.  Now  the  population  is  about  46,000,- 
000.  The  aggregate  sum  of  exports  and  imports,  in- 
cluding the  precious  metals,  is  about  $1,100,000,000 — 
about  $24  per  capita  of  population.  ^ 

The  true  measure  of  the  money  needs  of  a  country  is 
the  total  amount  of  business  that  the  country  is  capa- 
ble of  doinir,  toijethcr  with  the  indebtedness  and  tiixes 
thereof. 


174         THE  AMOUNT  OF  MONEY  NEEDED : 

The  increase  of  internal  business  since  1859  has  been 
much  greater  than  that  of  foreign  commerce  or  popu- 
lation. This  is  shown  by  the  immense  increase  in  the 
number  of  banks,  bank  clearinijs  and  railroad  earninsfs. 
The  railroad  mileage  was  10,982,  and  gross  earnings 
$39,406,358  in  1851.  In  1875  the  railroad  mileage  was 
72,623,  and  gross  earnings  $503,065,505.  An  increase 
of  1300  per  cent,  of  railroad  business  since  1851. 

The  exchanges  at  the  New  York  Clearing  House  were 
$6,448,005,956  for  1859,  and  for  1877  they  were  $20,-' 
876,555,937,  three  and  one-fourth  times  greater  than 
for  the  former  year.  We  take  the  transactions  of  the 
New  York  Clearing  House  as  an  index  to  the  ratio  of 
increase  of  the  aggregate  business  of  the  United  States. 
The  number  of  banks  have  about  doubled  since  1859. 
This  great  increase  of  business  is  also  evidenced  by  the 
great  increase  of  urban  population,  of  manufactures, 
of  small  towns  alons:  railroads  and  elsewhere.  These 
facts  justify  the  conclusion  that  the  aggregate  business 
transactions  of  the  country  are  now  three  and  one-fourth 
times  their  sum  in  1859,  and  without  an  increased  pow- 
er of  money  to  circulate  Avould  require  three  and  a 
fourth  times  as  much  money  now  as  then. 

But  we  estimate  the  increased  power  of  money  to  cir- 
culate at  44  per  cent.,  on  account  of  increased  bank 
facilities.  The  capital  stock  of  all  national,  state  and 
savings  banks  and  of  trust  and  loan  companies  in  the 
United  States  in  1876  was  about  $651,725,000.  For 
1859  the  capital  stock  of  state  banks  was  $401,976,242. 
JThe  capital  stock  of  savings  banks  and  trust  and  loan 
companies  for  that  year  is  not  reported,  but  must  have 
been  $50,000,000,  making  the  total  capital  stock  of 
all  banking  institutions  of   1859   about  $450,000,000. 


FIFTEEN  HUNDRED  MILLIONS.  175 

This  gives  an  increase  of  44  per  cent,  of  capital  stock 
for  1876  over  that  of  1859.* 

These  estimates  result  in  producing  $1,056,000,000 
as  the  money  needs  of  the  country  now  indicated  by 
business  transactions  alone. 

But  several  other  items  come  in  to  swell  the  sum.  In 
1859  the  indebtedness  of  the  country  was  as  nothing 
compared  with  the  present  liabilities.  The  existing  in- 
debtedness, national,  state,  municipal,  corporate  and 
individual,  has  been  variously  estimated.  The  Mone- 
.tarv  Commission  put  the  national  debt  at  $2,000,000,- 
000;  certain  state,  city,  town,  county,  railroad  and 
canals  at  $3,804,000,000  ;  liabilities  of  630,099  traders 
and  manufacturers  at  $13,000,000,000.  These  make 
$18,800,000,000.  There  has  been  no  estimate  of  the 
liabilities  of  the  thousands  of  mining  and  other  com- 
panies, of  farmers,  mechanics,  worlvingmen,  profess- 
ional men,  etc.,  and  bank  loans  and  deposits  are  not 
included  in  the  above  stated  sum.  "We  estimate  them 
to  be  at  least  $7,000,000,000,  making  the  aggregate 
indebtedness  of  the  country  at  $25,000,000,000.1  The 
total    sum    of    indebtedness    is    absolutely'    appalling. 


*We  do  not  think  that  the  banks  have  increased  the  power  of 
money  to  circulate  in  a  greater  ratio,  for  two  reasons  : 

l>t.  Banks  in  small  towns  and  in  the  rural  districts  do  not  facil- 
itate the  circulation  of  money,  because  they  hold  25  to  50  per  cent, 
of  their  deposits  as  reserves,  and  simply  take  that  much  out  of  cir- 
culation aud  send  it  to  the  money  centers  for  safe  keeping,  and  thus 
take  from  the  country  so  nmch  money  that  would  otherwise 
circulate. 

2nd.  While  every  new  bank  in  cities  may  facilitate  the  circulation  of 
money,  at  the  same  time  it  absolutely  takes  out  of  circulation  every 
dollar  of  its  reserves. 

That  the  power  of  money  to  circulate  does  not  increase  equally 
with  the  increase  of  business  is  proved  by  the  necessity  of  inveuting 
and  using  paper  money,  and  of  increasing  the  amount  of  it  by  civil- 
ized nations  during  the  last  few  centuries  of  advancement. 

tSee  Chapter  XI :  The  Country's  Indebtedness. 


176  THE  AJIOUNT  ON  MONEY  NEEDED. 

There  is  no  method  of  estimating  the  total  indebted- 
ness of  1859.  But  as  the  business  of  the  country  was 
only  1%  as  much  in  1859  as  now,  and  as  the  great  con- 
traction of  the  currency  since  1866  has  created  trel)le 
the  necessity  of  borrowing  that  there  was' in  1859  and 
had  been  prior  thereto,  we  put  the  debts  of  that  time  at  ^ 
of  the  debts  of  1877.  This  estimate  makes  the  total  in- 
debtedness of  the  United  States  in  1859  about  $3,000,- 
000,000.  The  rate  of  interest  on  these  sums  averages, 
say,  six  per  cent.,  making  $1,320,000,000  more  interest 
to  pay  ^jer  annum  now  than  in  1859.  Of  this  interest, 
the  enormous  sum  of  $135,000,000  goes  abroad. 

Then  there  are  greatly  increased  uses  for  money  by 
reason  of  the  $200,000,000  extra  cost  of  Federal  govern- 
ment administration  ;  increased  expenditures  of  state, 
citv,  countv  and  school  district  administrations  ;  increas- 
ed  expenses  on  colleges,  asylums,  hospitals,  pauperism, 
etc.  Adding  these  several  extra  uses  of  money  to 
those  of  1859,  it  would  swell  the  sum  to  $1,500,000, 
000  to  place  this  country  in  as  easy  circumstances  as  in 
that  3'ear.  This  would  be  a  little  over  $32.50  per 
capita  of  population. 

This  estimate  is  not  extravagant.  It  is  rather  below 
than  above  what  the  facts  indicate.  France  has  nearly 
$40  79er  capita  of  her  population,  and  England  has 
about  $26.  This  country  ought  to  have  $1,500,000,- 
000  of  money — enough  to  profitably  emjjloy  every 
willins:  hand  and  brain  in  the  land. 


CHAPTER  X. 


RESUlVrPTION  MEANS    CONTRACTION  ; 
THE    MONEY  IT  WILL  Giy~E    US. 

We  call  it  forced  resumption  because  it  is  not  pro- 
duced by  the  natural  laws  of  finance  and  commerce, 
but  is /orcferf  by  legislation.  The  resumption  act  pro- 
vides that  Avhenever  any  national  bank  increases  its 
issues,  and  whenever  a  new  national  bank  issues  its 
notes,  the  secretary  shall  redeem  an  amount  of  legal 
tender  note?;  equal  to  SOjjer  centum  of  the  amount  of  such 
new  issues  of  national  bank  notes,  until  the  total  sum 
of  leo-al  tender  notes  outstanding  shall  be  reduced  to 
$800,000,000.  The  legal  tenders  constitute  the  prin- 
cipal reserves  of  the  national  banks,  and  in  order  to 
keep  their  issues  within  safe  bounds,  they  will,  lietween 
now  and  January  1st,  1879,  do  as  they  have  done  since 
January  14th,  1875  :  keep  pace  in  the  reduction  of 
their  issues  with  the  retirement  of  the  legal  tenders. 
They  have,  since  the  passage  of  the  Resumption  Act, 
as  we  have  seen,  reduced  their  issues  over  $32,000,000, 
while  a  little  over  $30,000,000  of  legal  tenders  were 
being  retired.  We  may  safely  conclude,  then,  that  by 
the  1st  of  January,  1879,  they  will  have  retired  a  large 
amount  of  their  issues,  pehaps  $20,000,000.  This  will 
leave  the  country  at  that  date  $300,000,000  legal  tenders 


178  RESUMPTION  MEANS  CONTRACTION; 

and  about  $300,000,000  national  bank  notes  ;  in  the 
aggregate  about  $600,000,000  currency,  about  $70,000,- 
000  less  than  we  now  have. 

What  will  occur  after  January  1st,  1879,  no  man 
knows.  But  we  may  calculate  from  experience  and 
upon  what  the  future  promises.  The  Resumption  Act 
provides  that  the  Secretary  of  the  Treasury  shall,  on 
and  after  January  1st,  1879,  redeem  in  coin  the  United 
States  legal  tender  notes  then  outstanding  on  their 
presentation  for  redemption  atthe  office  of  the  Assis- 
tant Treasurer  of  the  United  States,  in  the  city  of  New 
York,  in  sums  of  not  less  than  $50.  To  enable  the 
Secretary  to  prepare  and  provide  for  the  redemption  of 
the  legal  tenders,  the  act  authorizes  him  to  sell  United 
State  bonds  for  coin.  -It  took  the  Secretary  from  January 
14th,  1875,  to  November  1st,  1877 — two  years  and  nine 
months — to  redeem  in  coin  and  retire  $27,509,108  of 
the  legal  tenders  by  using  all  tlie  power  conferred  by  the 
act.  It  is  not  probable  that  he  can  procure  coin  more 
rapidly  in  the  future  than  in  the  past.  Nothing  indi- 
cates that  he  can.  He  will  have  to  resort  to  strategy. 
This  he  can  easily  do.  The  legal  tenders  will  be  pre- 
sented for  redemption  princiijally  b}^  banks.  The  Secre- 
tary will  offer  to  sell  bonds.  Perhaps  he  will  appoint  a 
syndicate  of  bankers  to  negotiate  the  sale  of  them. 
These  banks  or  the  syndicate  will  find  parties  in  this 
country  who  want  to  buy  bonds  with  legal  tender  notes. 
The  banks  or  the  syndicate  will  take  the  notes,  and  say 
to  the  Secretary:  "We  have  found  purchasers  for 
$50,000,000  of  bonds,  and  we  present  at  the  Treasury 
$50,000,000  of  Icgal-tcuders  for  redemption."  The 
Secretary  will  deliver  the  bonds  to  the  syndicate  or 
banks  and  thoy  will  deliver  the  legal  tenders  at  the 


THE  MONEY  IT  WILL  GIVE  US.  179 

Treasury.  Thus  $:)0,000,000  of  coin  bonds  will  be  sold 
und  $50,000,000  of  legal  tenders  will  be  redeemed  with- 
out the  passage  of  a  dollar  in  coin.  The  rapidity  of 
these  transactions  will  depend  upon  the  facility  with 
which  the  banks  or  S3aulicate  can  collect  legal  tenders 
together  and  find  parties  willing  to  exchange  paper 
monc}^  for  bonds.  Such  transactions  may  exceed  or 
fall  below  $50,000,000  a  year.  But  let  it  be  supposed 
that  that  amount  of  le2:al  tenders  shall  be  redeemed 
each  year.  This  will  materially  affect  the  amount  of 
the  issues  of  national  banks. 

There  is  no  law  which  makes  national  bank  notes  a 
leo:al  tender  for  debts  between  individuals,  or  between 
individuals  and  corporations,  or  for  state  and  county 
taxes.  Section  5182  of- the  revised  statutes  of  the 
United  States,  makes  national  l)ank  notes  payable  on 
demand  at  the  banks  that  issue  them.  In  other  words, 
all  national  bank  notes  are  redeemable  in  legal  tender 
money,  paper  or  coin,  on  their  presentation  for  re- 
demption to  the  bank  which  issued  them. 

The  existence  of  the-  national  banks  depends  upon 
their  power  to  thus  redeem  their  issues.  Their  ability 
to  so  redeem  their  issues  depends  upon  the  facility 
with  which  they  can  obtain  the  legal  tender  money  to 
redeem  with.  This,  in  turn,  depends  upon  the  amount 
of  legal  tender  money  in  the  country. 

The  amount  of  redeemable  paper  money  that  can 
circulate  in  a  country,  at  par  with  the  money  it  is  to  "be 
redeemed  in,  generally  ranges  from  one-half,  two- 
thirds,  to  three-fourths,  rarely  ever  four-Hfths  of  the 
amount  of  the  redemption  money  in  the  countiy. 

In  1859  the  total  amount  of  coin  in  the  U.  S.  was 
about  $275,000,000.     At  that  time  the  banks  of  this 


180  RESUMPTION  MEANS  CONTRACTION  ; 

country,  "with  practically  unlimited  power  of  issue,  were 
able  to  maintain  in  circulation  only  $193,000,000  of 
bank  notes  at  par  with  gold.  If  at  that  time  the  banks 
could  maintain  in  circulation  at  i3ar  an  amount  of  bank 
notes  bearing  the  proportion  only  of  2  to  3  of  coin,  in 
which  they  were  redeemable,  it  may  not  reasonably  be 
expected  that  the  national  banks  can  do  more.  The 
probabilities  are  that  they  could  not  maintain  so  large 
a  proportion  of  notes.  They  in  fact  are  not  doing  it 
now. 

The  amount  of  irdd  and  silver  coin  and  bullion  now 
in  the  U.  S.  we  believe  to  be  not  very  far  from  $150,- 
000,000.  Add  this  to  the  legal  tender  notes,  and  it 
shows  the  total  of  legal  tender  money,  both  paper  and 
coin,  now"  in  this  country,  to  be  about  $000,000,000. 
The  total  amount  of  national  bank  notes  in  circulation, 
as  reported  by  the  Secretary  of  the  Treasuiy,  is  $316,- 
775,111,  but  little  over  three-fifths  as  much  as  there  is 
coin  and  legal  tenders. 

All  financial  history  furnishes  indubitable  evidence 
that  whenever  the  legal  tender  jnoney,  paper  and  coin, 
of  a  country  is  reduced  in  its  ao^<;reofate  amount,  a  con- 
traction  of  the  volume  of  redeeana'ble  l)ank  paper  money 
quickly  follows.  This  is  forcibly  illustrated  by  the 
contraction  of  national  bank  issues,  durinij  the  retire- 
ment  of  legal  tenders,  since  1875,  under  the  resump- 
tion act.  The  finance  history  in  subsequent  pages  will 
also  amply  illustrate  this  point. 

The  national  banks,  in  order  to  keep  within  safe 
banking  rules,  and  to  i)reserve  their  existence,  must 
reduce  their  issues  as  the  a<2:£;re2;ate  amount  of  \e<za[ 
tenders  and  coin  diminishes. 

The  Secretary  of  the  Treasury  advances  the  opinion, 


THE  MONEY  IT  WILL  GIATE  US.  181 

that  the  resumption  act  docs  not  require  the  retire- 
ment of  legal  tenders  redeemed,  but  that  they  may  be 
reissued.  The  act  creating  the  legal  tenders  says, 
they  shall  be  payable  to  the  bearer,  at  the  treasury. 
This  means  a  discharge,  a  destruction  of  all  the  money 
functions  of  these  notes.  If  the  act  means  what  the 
Secretary  intimates,  why  docs  he  destroy  the  legal 
tenders  now  being  taken  up?  The  word  "redeem" 
means  the  same  as  applied  to  the  ■$300,000,000  legal 
tender  and  the  $50,000,000  excess  thereof  outstanding. 

The  resumption  act  unquestionably  means  a  payment 
and  destruction  of  all  the  legal  tenders,  or  it  means 
nothing  but  a  useless  and  expensive  fiscal  operation  by 
the  government.  Suppose  the  government  should  re- 
issue the  notes,  as  the  Secretary  intimates.  It  must 
redeem  them  airain,  according  to  the  act.  The  Secre- 
tary  is  authorized  to  sell  bonds  to  get  coin  to  redeem 
with.  It  would  result  in  redemption,  reissue,  and  re-re- 
dcniption  over  and  over  again,  involving  the  govern- 
ment deeper  and  deeper  in  interest-bearing  coin  indebt- 
edness with  every  such  operation — a  measure  which  not 
even  the  Secretary  of  the  Treasury  can  defend  with 
any  show  of  sound  reason. 

If  the  act  is  not  repealed,  every  legal  tender  will  be 
destroyed  ultimately,  and  the  national  banks  can  then 
look  to  nothing  but  ijold  and  silver  as  reserves. 

The  operations  of  the  resumption  act  Avill  cause  the 
national  banks  to  constantly  diminish  their  issues,  until 
every  legal  tender  note  shall  have  been  redeemed. 
Then  their  only  reserves  will  be  the  stock  of  coin  in 
the  country,  which,  as  we  have  seen  in  Chap.  VIII., 
increased  only  $31,000,000  in  five  years,  from  1872  to 
1877,  and  in  1877   decreased  from  June  to  October, 


182  RESUMPTION  MEANS  CONTRACTION  ; 

nearly  $8,000,000,  at  the  rate  of  over  $23,000,000  a 
year. 

If  $50,000,000  legal  tenders  be  redeemed  per  an- 
num, it  will  require  seven  years  to  complete  the  re- 
demption of  the  total  sum  now  outstanding.  As  has 
just  been  seen,  the  stock  of  coin  in  the  country  in- 
creased only  at  the  rate  of  a  little  over  $6,000,000  a 
year,  from  June,  1872,  to  June,  1877,  and  from  June 
to  October  of  the  latter  year  it  decreased  over  $8,000,- 
000.  It  appears  reasonable  then  that  during  the  seven 
years  required  for  the  redemption  of  the  legal  tenders, 
the  additions  to  the  present  stock  of  coin  will  not  be 
greater  than  they  were  from  1872  to  1877 — about  $6,- 
000,000  a  year— about  $40,000,000  in  the  aggregate 
during  the  seven  years  required  to  complete  the  retire- 
ment of  the  legal  tenders.  Thus  it  appears  that  while 
$50,000,000  of  legal  tenders  will  be  retired  each  year 
there  will  be  an  increase  of  coin  stock  of  only  about 
$6,000,000 — resulting  in  an  actual  reduction  of  the  stock 
of  redemption  money,  coin  and  legal  tenders  of  $44,- 
000,000  a  year. 

According  to  this  calculation  there  will  be  only  about 
$200,000,000  of  coin  in  the  country  when  the  seven 
years  expire,  and  this  will  constitute  the  only  reserve, 
redemption  fund,  of  the  banks  and  the  nation. 

The  past  history  of  banks  of  issue  in  this  country 
shows  that  their  mininmm  and  maximum  issues  have 
ranged  from  about  one-half  to  three-fourths,  rarely  ever 
four- fifths,  of  the  total  sum  of  legal  tender  money  in 
the  country. 

Let  it  be  supposed  that  up  to  January  1st,  1879,  their 
issues  will  l)e  about  three-fifths,  and  after  that  time 
four-fifths  of  the  stock  of  specie  and  legal  tenders,  and 


THE  MONEY  IT  WILL  GIVE  US. 


183 


that  the  fractional  curroncv  will  be  retired  durins:  1879. 
Then,  upon  the  foregoinj::  and  estimating  the  population 
to  increase  at  the  rate  of  half  a  million  per  annum,  we 
present  the  following  table  of  the  countr}  's  total  sup- 
ply of  money  for  18GG  and  1877,  and  the  probable  sup- 
ply for  subsequent  years : 


i 

Per  capita  supply 

Toral  Gold,  Silver! 

ot'  Money, 

Actual  per  capita 

Year. 

aud  Paper  Moiuy 

only  a  part  of 

circuiatiou, 

in  the  U.  S. 

which 

about 

circulates. 

Jan.   l>si;i)... 

Si,yoo,ooo,ooo 

a '4.28 

$-•^0.00 

Dec.  1877   .. 

8;i(i  000  000 

18.17 

11.00 

Jan    1870... 

747.000.(X)0 

16.08 

fi.OO 

"     1880   .. 

740.000,000 

15  73 

9.00 

"     1881... 

fii!4,000  000 

13.1)8 

8.00 

"     1882... 

581.000,000 

12.16 

7.00 

'•     1883... 

501,000  000 

10.39 

6  00 

At  this  time,  (December,  1877,)  although  there  is  a 
per  capita  ^uppl}-  of  $18.17,  yet  only  a  little  over  $11 
per  cajnta  are  in  actual  circulation — that  is  about  \^  of 
the  total  per  capita  supply  is  in  circulation,  the  l)al- 
ance  being  hekl  l^y  the  Treasury  and  the  hanks.  The 
same  proportion  of  reserves  will  reduce  the  actual  per 
caj)ifa  circulation  from  year  to  year  until  in  1882  and 
1883  it  will  fall  to  a  little  over  six  or  seven  dollars. 
The  process  of  contraction  shown  in  the  foregoing  table 
will  be  arrested  at  some  time  in  the  future  by  our  for- 
eign trade  and  the  destruction,  compromise  and  return 
of  large  amounts  of  our  government,  state,  corporate 
and  municipal  bonds  ;  but,  when  that  time  will  arrive, 
cannot  be  foretold.  The  condition  necessary  to  stop 
the  contraction,  provided  the  resumption  act  is  enforced, 
will  be  a  cessation  of  the  exportation  of  coin  from  this 
country,  and  this  cannot   occur   until,   1st,  Prices  of 


184  RESUMPTION  MEANS  CONTRACTION  ; 

merchandise  fall  so  low  here  below  European  prices  as 
to  induce  European  importers  to  import  from  this  coun- 
try so  largely  in  excess  of  our  imports  from  abroad  as  to 
make  our  foreign  balances  foot  up  our  foreign  interest ; 
2nd,  Or  until  our  foreign  balances,  being  paid  in  our 
own  bonds,  ultimately  return  home  and  fix  their  own- 
ership here,  and  thus  stop  exjDortation  of  coin  to  pay 
foreiini  interest. 

When  these  c-onditions  will  occur,  I  am  unable  to 
state,  of  course,  but  I  reckon  the  termination  of  the 
contraction  process  at  1882  or  1883  upon  the  theory 
that,  in  the  mean  time,  on  account  of  the  great  shrink- 
ao-e  of  values  and  destruction  of  business  that  must  f  ol- 
low  the  reduction  of  the  volume  of  money,  the  failures 
of  railroads  and  corporations,  and  the  inability  of  munic- 
ipalities and  states  to  meet  interest  will,  by  destruction 
of  securities  and  compromises  with  foreign  capitalists, 
reduce  the  foreign  l)onded  debts  of  this  country,  per- 
haps, half,  thus  cutting  down  our  foreign  interest  in  an 
equal  proportion.  During  the  same  time  many  millions 
of  national,  state  and  other  bonds  ^vill  be  returned  to  this 
country  to  settle  balances,  which  will  further  reduce  the 
foreiirn  interest  the  countrv  will  have  to  pay. 

These  calculations,  made  upon  the  hypothesis  that 
silver  will  be  remonetized,  are  based  on  the  most  san- 
guine hopes  that  can  be  reasonably  entertained  of  the 
amount  of  coin  and  bullion  that  may  exist  in  the  coun- 
try, and  a  very  gradual  retirement  of  legal  tenders.  In 
proportion,  as  the  amount  of  legal  tenders  retired  every 
year  exceeds  the  amount  estimated,  $50,000,000  a 
year,  in  that  proportion,  would  the  contraction  be  more 
rapid. 

The  sums  estimated  above  as  the  probable  amount  of 


THE  MONEY  IT  WILL  GIVE  US.  185 

money  the  country  will  have  under  the  continued  en- 
forcement of  the  Resumption  Act,  are  utterly  inadequate 
to  transact  the  gigantic  business  of  this  country.  The 
transaction  of  $100,000,000,000  of  business  a  3'ear  on 
five  hundred  millions  of  money  is  a  thing  utterly  im- 
possible. "NYe,  therefore,  conclude  that  resumption 
means  contraction. 

The  officers  and  directors  of  the  national  banks  so  un- 
derstand it,  and  have  given  evidence  of  that  belief  by 
reducing  their  issues  over  $33,000,000  since  January 
1st,  1875.  The  operation  of  the  Resumption  Act  proves 
it  by  reducing  the  amount  of  outstanding  legal  tenders 
over  $30,000,000  since  January  14th,  1875. 

Hon.  Joseph  S.  Ropes,  an  able  and  honest  resump- 
tionist,  in  an  article  in  the  November-December  No.  of 
the  North  American  Review,  for  1877,  says,  resump- 
tion means  contraction.  Every  advocate  of  resumption 
admits  it  by  declaring  that  there  is  a  plethora  of  money 
in  the  country. 

TJien  the  vital  question  before  the  country  now  is: 
What  will  be  the  effects  of  contraction? 


CHAPTER  XI. 


CONTRACTION  OF  THE  CURRENCY  :    IT  CAUSED  THE    COUN- 
TRY'S   INDEBTEDNESS. 

Those  who  advocate  a  resumption  of  specie  pay- 
ments have  constantly  asserted  that  the  vast  indebted- 
ness of  this  country  has  been  caused  by  what  they 
term  an  unprecedented  inflation  of  the  currency  during 
and  since  the  war ;  and  those  who  oppose  resumption 
have  avoided  a  discussion  of  this  point.  This  question 
is  an  important  one,  and  ouglit  to  be  candidly  investi- 
gated. The  national  debt  was  created  during  the  war, 
and  is  not  to  be  attributed  to  the  currency  at  all,  but 
to  the  necessities,  extravagancies  and  frauds  of  the  war 
period.  The  first  thing  to  be  done  is  to  ascertain  the 
time,  as  near  as  can  be,  when  the  increase  of  debts  took 
place. 

Of  Railroads.  In  1850  the  total  mileage  of  rail- 
roads in  the  U.  S.  was  about  9,000.  By  18(J0  it  had 
increased  300  per  cent.  ;  by  1870,  500  per  cent.,  and  at 
the  close  of  1875,  800  per  cent. 

The  number  of  miles  of  railroad  at  certain  periods 
were  about  as  follows:  In  1850,  about  9,000;  1860, 
about  27,000;  1870,  about  53,000;  1875,  about  74,- 
000.  It  is  readily  seen  that  the  greatest  num})er  of 
miles  of  railroad  constructed  per  annum  since  1850,  was 


IT  CAUSED  THE  COUNTRY'S  INDEBTEDNESS.  187 

durlncr  the  years  from  1870  to  1875.  From  1850  to 
18G0  the  average  miles  completed  per  annmu  were 
1,800  ;  from  18C0  to  1870,  2,(300  ;  from  1870  to  1875, 
4,200.  The  Railway  Age  reports  the  number  of  mites 
co!iiploted  and  miles  of  track  laid  during  1870  at  2,264. 

Poors  IlaUroad  Manual  estimated  the  a2:2:re2:ate 
amount  of  railroad  indebtedness  in  the  U.  S.  at  $2,459,- 
617, o4J)  in  1875,  or  about  $32,100  per  mile.  Taking 
these  tigures  as  a  basis,  we  find  that  from  1860  to  1870 
the  amount  of  railroad  debt  created  was  $855,400,000, 
or  about  $85,540,000  per  annum,  and  for  the  fiv^e  years, 
from  1870  to  1875,  the  amount  of  railroad  debt  created 
was  about  $690,900,000,  or  about  $138,180,000  per 
annum. 

But  from  1860  until  after  the  war,  say  until  1866, 
there  was  comparatively  little  done  in  building  railroads. 
We  conclude,  therefore,  that  of  the  47,000  miles  of 
railroad  constructed  between  1860  and  1875  about  40,- 
000  were  built  from  1867  to  1875.  It  follows,  in  any 
view  of  the  facts,  that  the  most  rapid  accumulation  ,of 
railro:id  debt  has  occurred  since  1867,  and  probably 
between  1870  and  1875,  aggregating  about  $164,000,- 
000  ])cr  annum. 

The  period  of  greatest  inflation  of  the  currency  waa 
in  t-ie  latter  part  of  1865.  when  it  amounted  to  over 
$1,800,000,000.  The  periods  of  greatest  contraction 
were  during  1866  and  1867,  during  which  the  currency 
was  reduced  nearly  $500,000,000  in  the  former,  and 
over  $500,000,000  in  the  latter  year. 

We  find,  therefore,  that  not  durins:  the  ffrcatcst  infla- 
tion,  but,  on  the  contrary,  durini?  and  since  the  firreatest 
contraction  of   the  currency,  the  greatest  increase  of 


188 


COXTRACTIOX  OF  THE  CURRENCY 


railroad  debts  has  occurred,  an  increase  of  nearly  100 
per  cent,  per  annum. 

Municipal,  Debts.  Following  is  a  table  of  the  debts 
of  the  towns  and  cities  named,  for  the  years  1870  and 
1875-76  ;  hundreds  are  left  off,  excej)t  in  total  foot- 


ings. 

Towus  and  Cities 

1870* 

1875-76 

Towns  and  Cities 

1870* 

1875-76 

New  York 

$54,436 

$161,165 

Chelsea,     with 

Philadelphia*. 

42,103 

69,616 

Boston, inSuf- 

Boston 

22,598 

43,923 

folk  Co 

e  1,661 

Brooklyn 

20 

38,494 

Lawrence, with 

Baltimore 

13,568 

32,943 

Lynn.in  Essex 

New  Orleans.. 

26,.500 

22,699 

Co 

1,594 

Washington... 

2,363 

22,000 

Springfield 

646 

1,562 

St.  Louis 

13,613 

17.423 

Salem.        with 

Cincinnati 

5,020 

17,235 

Lynn, in  Essex 

Chicago 

14,103 

1,6996 

Co 

1,483 

Jersey  City.. . 

5,133 

14,247 

Somerville,with 

Pittsburgh 

4,042 

13,533 

Cambridge,  in 

Louisville 

5,006 

10,795 

Middlesex  Co. 

1,472 

Newark 

3,100 

9,465 

Indianapolis  .. 

155 

1,455 

Providence  . . . 

1,795 

8,843 

St.  Joseph 

500 

1,380 

Cleveland 

2,101 

8,066 

Brookliue 

648 

1  311 

Buffalo 

2,031 

7,264 

Columbus,  O.. 

none. 

1,261 

Portland 

2,706 

6,402 

St.  Paul 

812 

1,230 

Memphis 

5,272 

5,851 

New    Bedford, 

Rochester 

634 

5.579 

with  Fall  R.  in 

Charrst'u,S.C. 

5,137 

5.514 

Bri.stol  Co.. . 

1,195 

Elizabeth 

2  678 

5,400 

Beverly,     with 

Ricliniond 

2,111 

2,032 

Lynn, in  Essex 

Cambridge... . 

6,028 

4,280 

Co 

1,041 

Toledo 

401 

3,782 

Lynchburg .... 

720 

921 

Savannah 

2,099 

3,730 

Galveston 

250 

873 

Albany  

2,800 

3,083 

Holyoke,    with 

.San  Francisco* 

7,458 

3,431 

.     Springfield,  in 

Worcester  .... 

2,774 

3,099 

Hampton  Co. 

836 

Mobile 

2,195 

2,804 

Fitchburg,wlth 

Fall  River 

1,462 

2,500 

Worcester,  io 

Milwaukee 

118 

2,544 

Worcester  Co. 

# 

698 

Bangor 

448 

2,484 

Northampton.. 

357 

663 

[Continued  on  opposite  page.] 


IT  CAUSED  THE  COUNTRY'S  IXDEBTEDNESS.  189 


Towns  and  Cities  1870*        1875-76 
Powell,      with 

Cambridge,  in 

Middlesex  Co.  2,289 

Detroit 723         2  282 

Norf  Ik 1,855         2,150 

Augusta 1  3!)5         2,100 

Lynn 4,424         2,030 

Nashville 2,050         1,737 

Alleghany,  with 

Pittsburgh,  in 

Alleghany  Co,  1,667 
Massachusetts, (other  towns),  for 

Ohio,  (other  towns) for 

Total 


TowTis  and  Cities      1870*  1875-76 

Columbus,  Ga.         400  582 

Zanesville none.  548 

Newburyport, 

with  Lynn,  in 

Essex   Co....  535 

Peabody,   with 

Lynn, in  Essex 

Co 523 

Medford,   with 

Cambridge,  in 

Middlesex  Co.  519 
1870,  $1,292,676;  1875-76,  $14,161 
1870,  549,150;  1875-76,  8,424 
$278,646,125  $040,791,867 


Total  increase  from  1870  to  1876. .  $362,145,742 

This  table  reveals  the  fact  that  the  municipal  debts 
of  the  country  (taking  the  towns  and  cities  named  here 
as  showing  the  average  increase),  increased  between 
1870  and  1876,  to  2^  times  greater  at  the  latter  date 
than  they  were  at  the  former.  Here,  by  far,  the  great- 
est increase  of  municyial  debt  ever  known  in  this 
country  has  occurred,  not  during  inflation,  but  on  the 
contrary,  after  the  most  gigantic  contraction  of  the 
currency  that  ever  took  place. 

State  Debts.  The  total  state  indebtedness  in  1860 
has  been  estimated  at  $266,781,525,  and  in  1875,  in- 
cluding the  latter  year,  $367,146,623,  an  increase  of 
$100,000,000  in  fifteen  years,  or  an  average  annual 
increase  of  $6,666,000.  The  Monetary  Commission  in 
their  report  to  Congress,  made  March  2d,  1877,  esti- 
mated the  amount  of  state  debts  then  at  $390,000,000, 


*In  this  table,  under  1870  are  placed  the  debts  of  all  municipal- 
itiis  in  the  counties  in  which  those  cities  are  located.  As  no  city 
debt  was  tlieu  reported  for  Philadelphia  and  San  Francisco,  the 
amounts  then  reported  as  county  debts  are  included. 


190         CONTRACTION  OF  THE  CURRENCY  * 

an  increase  since  1875  of  $22,854,000  in  one  year  and 
three  months  clurino;  1876-7.  The  state  debt  of  Mas- 
sachusetts  was  $22,893,972  in  1805,  and  $33,550,464 
in  1-^wG.  We  have  not  at  hand  reports  of  the  present 
indebtedness  of  all  the  states,  but  it  is  known  that  the 
extravairancies  of  the  governments  of  a  number  of  the 
southern  states,  since  1868,  Lirgely  increased  their 
debts  since  that  time.  Other  states  in  other  parts  of 
the  Union,  have  erected  and  improved  public  edifices 
and  other  property,  given  sul)sidies  to  railroads,  and 
increased  ex}3enditures  in  various  dh-ections  since  1868. 

Another  evidence  of  the  increase  of  state  debts  in 
the  last  ten  years  is  found  in  the  enormous  increase  of 
the  amount  of  American  securities  held  L'y  foreign  cap- 
italists since  that  year.  Dr.  Edward  Young  estimated 
sucli  indebtedness  so  held  to  be  about  $1,200,000,000 
in  1873.  The  Monetary  Commission  estimated  it  at 
not  less  shan  $2,000,000,000  up  to  March,  1877.  Here 
is  an  increase  of  the  amount  of  bonds  held  abroad  of 
$800,000,000  in  four  years,  of  which  much  is  state 
bonds. 

Banks.  The  report  of  tlie  Comptroller  of  the  Currency 
for  1876  shows  the  following  increase  of  liabilities  of  the 
national  banks  from  1869  to  1876  :  Due  to  depositors 
in  1869,  $523,000,000  ;  in  1876,  $666,200,000  ;  increase 
since  1869,  $142,800,000.  Due  to  other  banks  in  1869, 
$118,900,000;'  in  1876,  $179,800,000;  increase  since 
1869,  $60,900,000.  Other  liabilities  in  1869,  $5,900,- 
000;  in  1876,  $10,600,000;  increase  since  1869, 
$4,700,000.  A  total  increase  of  liabilities  in  these 
three  items  of  $208,400,000  from  1869  to  1876.  These 
facts  prove  that  the  gr-eatest  increase  of  state,  corpo- 
2'ate  and  municipal  indebtedness  of  the  countrj'  took 


IT  CAUSED  THE  COUNTRY'S  INDEBTEDNESS.  191 

place,  not  during  inflation,  l)iit  after  the  greatest  con- 
traction of  the  currency,  from  18G8  omvard. 

Individual  Indebtedness.  We  have  no  data  show- 
ing in  terms  the  increase  of  individual  indebtedness, 
and  must,  therefore,  resort  to  reasoning  from  facts  and 
conditions.  If  the  a2:<!:reijate  of  individual  indebted- 
ness  of  a  country  always  bore  an  unvarying  propor- 
tion or  relation  in  amount  to  the  sum  of  business  done, 
it  would  be  comparatively  easy  to  arrive  at  something 
near  a  correct  conclusion,  and  from  it  the  period  of 
greatest  accumulation  of  individual  indelitedness  would 
a})pear  to  be  from  18G9  onward,  after  the  greatest 
contraction  of  the  currency  had  taken  place,  because 
the  greatest  amount  of  business  ever  done  in  this  coun- 
try was  transacted  in  1869,  as  appears  by  the  bank 
clearings  given  in  another  chapter.  But  such  is  not  a 
correct  rule  of  estimating  indebtedness  ;  other  reason- 
ing must  be  resorted  to. 

Prices  of  property  are  controlled  by  the  volume  of 
money  in  circulation,  as  modified  by  other  things.      It 
is  known   and    will  be  conceded  that  the  great  body 
of  mankind  in   all  their  business    arrangements    base 
their  calculations  mainly  upon  existing  prices  and  con- 
ditions.    When  the  war  closed,  and  a  million  of  men 
returned  from  the  tented  field  to  domestic  and  busi- 
ness pursuits,  there  were  $1  ,(i()0,()00,()00  of   money  in 
the  country.     It  took  the  country  at  least   one   year 
after  the  close  of  the  war  to  settle  down  to  business. 
In  January,  18()G,  there  were  $1,800,000,000  of  money 
in  the  United  States.     Prices  rano-ed  hiirh  accordinijlv. 
The  hearts  of  men  were  glad  and  bouyant  Avith  hope. 
A  nation  which  had  been  mad  Avith  Avar,  noAV  engaged 
in  the  pursuits  of  peace,  the  industries  and   connnerce, 


192         CONTRACTION  OF  THE  CURRENCY: 

with  strons:  hearts  and  vigorous  hands.  Men  calculated 
upon  existing  prices.  Quietly,  unknown  to  the  masses, 
the  means  which  sustain  prices  and  business,  the  vol- 
ume of  money,  was  being  rapidly  reduced  by  the  gov- 
ernment. No  panic  came  ;  the  money  was  legal  tender  ; 
confidence  remained  strong.  The  people,  without 
knowing  that  there  was  a  decrease  in  the  aggregate 
amount  of  money,  began  to  experience  the  handling 
of  less  of  it :  bejjan  to  feel  that  there  was  not  enough 
money  to  sustain  their  undertakings.  Piices,  also, 
began  to  decline  moderately,  but  not  sufficiently  to 
arrest  general  attention.  The  result  of  this  combinti- 
tion  of  circumstances  and  facts  was  a  resort  to  credit. 
Men  did  business  on  borrowed  capital ;  they  bought 
personal  and  real  property  on  credit.  It  was  credit 
which  took  the  place  of  the  $1,000,000,000  of  money 
retired  in  1866  and  1867,  and  so  well  sustained  prices 
until  the  crisis  in  1873. 

From  the  report  of  the  Monetary  Commission  : 
"A  temporary  maintenance  of  nominal  prices,  even 
in  the  presence  of  a  shrinking  volume  of  money,  is  es- 
pecially practicable  with  imperishable  property,  such 
as  real  estate.  AVhen  money  begins  to  l)ecome  scarce, 
by  reason  of  a  shrinkage  in  its  volume,  the  first  effect 
upon  real  estate  is  found  to  be,  not  a  decline  of  its 
nominal  price,  but  a  diminution  in  the  number  of  trans- 
actions. Market  reports  quote  real  estate  ^duU;  few 
sales,  hut  pr-ices  Jinn.'  This  stagnation  is  ascribed  to 
temporary  causes,  and  a  speedy  recovery  predicted.  In 
order  to  maintain  prices  the  terms  of  purchase  are 
made  easier.  The  amount  of  cash  payments  is  reduced, 
and  the  deferred  payments  secured  by  mortgage  on 
the  property,  extended  over  longer  periods.  After 
a  time  this  expedient  fails,  and,  even  then,  nominal 
prices  are  unnaturally  held  up  for  a  short  period  by 
the  strug2:les  of  those  who  have  purchased  upon  these 


IT  CAUSED  THE  COUNTRY'S  INDEBTEDNESS.  193 

extended  credits,  and  by  the  tenacity  of  owners  who 
refuse  to  sell  at  lower  figures,  and  mortgage  their  own 
property  to  protract  their  power  to  hold." 

The  business  of  the  country  was  kept  up,  but  upon 
constantly  declining  prices,  resulting  in  constantly  in- 
creasing indebtedness  to  meet  losses,  until  the  pressure 
of  debts  became  extremely  heavy.  Then  a  system  of 
"borrowing  from  Peter  to  pay  Paul"  prevailed,  and  a 
struggle  to  meet  annual  interest  strained  every  nerve. 
This  state  of  affairs  continued  until  in  1873,  when  an 
enormous  balance  of  foreign  trade  against  the  country, 
together  with  the  great  decline  in  the  prices  of  stocks, 
bonds  and  securities,  and  an  intense  demand  for  gold 
to  meet  foreign  balances  and  interest  came  with  crush- 
ing weight,  bringing  a  panic  and  ruining  thousands. 
The  contraction  of  the  currency  assisted  to  reduce  gold 
premium,  but  credit  kept  prices  up.  And  when  gold 
premium  fell  to  a  point  below  the  fall  of  prices  it  in- 
duced large  imports  for  profit,  produced  heavy  balances 
against  us  and  caused  the  crisis. 

To-day  the  greatest  part  of  the  individual  indebted- 
ness of  this  country,  amounting  to  billions,  although 
owing  to  new  creditors,  is,  we  doubt  not,  indel)tedness 
with  arrearages  of  interest  which  Avas  contracted  from 
five  to  ten  years  ago.  And  these  debts  were  caused 
mainly  by  the  reduction  of  the  volume  of  money. 

There  is  another  fact  which  goes  far  towards  sus- 
taining our  position  that  the  greatest  accunmlation  of 
individual  indebtedness  has  occurred  since  the  contrac- 
tion of  the  currency.  This  is  the  great  increase  of  loans 
by  banks.  On  the  9th  of  Oct.,  1869,  the  total  sum  of 
national  bank  loans  was  $682,900,000,  and  their  capital 
stock  $426,400,000.     On  the  1st  of  Oct.,  1875,  the  loans 


194         CONTRACTION  OF  THE  CURRENCY  : 

were  $984,700,000,  and  capital  stock  $504,800,000. 
Here  is  an  increase  of  loans  of  over  $300,000,000^ 
nearly  50  per  cent. — from  1869  to  1875,  while  the  in- 
crease of  capital  stock  was  but  $78,400,000,  less  than 
twenty  per  cent. 

It  has  been  a  commonly  accepted  theory  that  an  in- 
flated state  of  the  currency  causes  a  disproportionate, 
ruinous  increase  of  indebtedness,  and  many  argue  from 
that  premise  in  apparent  ignorance  of  the  fact  that  it  is 
false.  The  amount  of  indebtedness  of  a  people  which 
is  safe  is  no  fixed  sum.  It,  depends  upon  the  amount 
of  money  they  have.  $5,000,000,000  would  be  as  hard 
to  pay  mth  a  volume  of  $500,000,000  as  $10,000,000,- 
000  would  be  with  a  sufficiently  lai-ger  volume  of  money. 

The  amount  of  money  in  a  country  at  any  given  time 
does  as  little,  perhaps,  towards  unduly  increasing  the 
amount  of  mdebtedness  as  any  other  power  which  op- 
erates upon  the  commercial  world.  A  decline  of 
the  volume  of  money  tends  to  induce  indebtedness. 
The  prime  causes  of  the  creation  of  debts  are  two  :  the 
business  hopes  and  ambitions  of  men,  and  necessity. 
Only  the  first  of  these  causes  can  exist  to  any  note- 
Worthy  extent  during  inflation.  Either  of  them  may, 
but  the  last  one,  necessity,  always  must  exist  during 
and  following  contraction.  Both  these  prime  causes 
spring  from  the  same  source,  want  of  money,  and  they 
intensify  the  human  passions  for  it. 

The  first,  hopes  and  amoitions,  are  spontaneous  ;  the 
latter  embraces  the  first  with  necessity  born  of  extran- 
eous circumstances  added.  The  second,  necessity,  pro- 
duces the  intenser  desire  for  money.  The  wnnt  of 
money  produced  hy  ]\o\)qh  and  ambitions  during  infla- 
tion finds  ample  means  of  being  satisfied  by  sales  of 


IT  CAUSED  THE  COUNTRY'S  INDEBTEDNESS.  105 

propert}'  or  securities,  or  by  skill  and  labor,  because  there 
is  a  plethora  of  money,  and  the  occasion  for  creating 
debts,  at  least  undue  indebtedness,  does  not  exist.  Tlie 
intense  Avant  of  money  produced  by  necessity,  during 
and  followiniz;  contraction  tinds  little  means  of  beins: 
satisfied,  because  there  is  a  scarcit}''  of  monej' — not 
enough  to  supply  the  pressing  needs,  and  neither  prop- 
erty nor  labor  can  be  readily  exchanged  for  money ; 
hence,  the  occasion  for  creating  debts  is  great.  It  fol- 
lows then,  that  in  every  case  of  a  considerable  contrac- 
tion of  the  volume  of  circulating*  money  there  will  be  a 
larger  increase  or  accumulation  of  indebtedness  than  in 
times  of  inflation,  with  the  single  exception  of  a  crisis 
or  panic,  contemporaneous  with  or  quickly  following 
contraction,  when  credit  is  cut  off  and  swift  destruction 
overtakes  the  debtor. 

Our  own  and  English  finance  history  establish  the 
truth  of  this  proposition.  In  this  country  both  causes 
for  want  of  money  have  existed  since  1867  ;  hopes  and 
ambitions  and  necessity  producing  an  unprecedented  in- 
crease of  indebtedness  since  that  period. 

Scrutiny  of  the  foUowiuo-  table  of  Eno-lish  bank  note 
circulation  and  bank  discounts  exhibits  the  fact  that  an 
increase  of  indebtedness  is  not  attributable  to  inflation, 
but  uniformly  followed  contractions  of  the  currency.  The 
increase  of  bank  discounts  in  1797  was  due  to  the  con- 
traction of  the  currency  from  £16,729,000  in  1796  to 
£9,674,000  in  1797.  An  increase  of  paper  money  from 
£9,674,000  in  1797  to  £13,000,000  in  1798  was  atten- 
ded by  no  noticeable  increase  of  bank  discounts. 

Table  of  the  amount  of  bank  note  circulation  and 
the  amount  of  discounts  at  the  Bank  of  England  for 
for  the  years  stated.     Up  to  1811  only  Bank  of  Eng- 


196 


CONTRACTION  OF  THE  CURRENCY  : 


land  circulation  is  given,  that  of  country  banks  not 
being  known ;  after  that  year,  the  total  is  given. 
Only  notable  years  are  embraced  in  the  table  : 


Year. 


1796. 
1797. 
1798. 
1810. 
1811. 
1814. 
1815. 
181  (J. 
1817. 
1818. 
1819. 
1824. 

1825. 

1826. 
1827. 
1831. 
1832. 


Bank  of  England 

Notes 

in  circulation. 


16,729,529 
9,674,000 
13,095,000 
21,019,600 
23,360,220 


Ist  part  of  year 
December  1  .. 
December  25  . 


Total  Bank 
circulation. 


(Contractions  lit  Country 
Bank  issues) 


47, 

46, 

42, 

43, 

48, 

40, 

32, 

41, 

31 

40, 

30, 

32, 

26, 

26, 


ri01,080 

272,000 
090,001) 
294,000 
278,000 
928,428 
758,000 
000,000 
000,000 
000,000 
219,6(il 
732,900 
452,000 
763,000 


Discount  of  Com- 
mercial Paper  at 
Bank  of  Enj^land. 


3  505,000 

5,350,000 

5  870,000 

23,070,000 

15,199,1100 

13,285,000 

20,600,000 

11,180,000 

5  507,000 

5  113,000 

6,321,000 

6,253,000 


7,691,000 


7,369,740 
3,389,000 
5,845.000 
3,247,169 


In  1810  the  drain  of  «fold  from  En2:land  to  meet  for- 
eign  demands  produced  a  great  contraction  of  country 
bank  issues,  and  as  a  result  immense  advances  were 
called  for  at  the  Bank  of  England,  raising  its  discounts  to 
£23,000,000.  Ill  1811,  a  year  of  panic,  discounts  were 
cut  down  to  £15,199,000.  Between  1814  and  1815  a 
reduction  of  the  total  volume  of  currency  of  £1,300,- 
000  took  place,  accompaned  by  an  increase  of  discounts 
from  £13,285,000  to  £20,600,000.  1816  the  currency 
was  reduced  £4,000,000,  causing  panic  and  reduction 
of  discounts  £9,000,000.  Between  1816  and  1817  the 
currency  was  expanded  £1,100,000  and  discounts  fell 
nearly  £6,000,000.  In  1818  the  currency  was  increased 
£5,000,000,  and  discounts  fell  off  £400,000.     In  1819 


IT  CAUSED  THE  COUXTUY's  IXIM:15TE1).\E.SS.  197 

the  currency  Avas  reduced  over  £7,000,000  and  discounts 
increased  £1,100,000,  and  so  on. 

Besides  the  necessity  of  borrowing  money  and  buy- 
ing on  credit  caused  by  the  imprudent  contraction  of 
the  currency  in  186G  and  in  1867  and  since,  another 
great  force  operated  to  create  debts.  It  was  a  new 
ambition  born  of  the  great  triumphs  of  the  war.  When 
the  war  closed  and  left  the  government  in  the  hands  of 
the  triumphant  party  of  progress,  that  party  and  its 
leaders,  deeply  imbued  with  centralizing  principles,  a 
passionate  love  for  great  corporations,  and  an  intense 
desire  for  display  of  progress,  gave  unrestrained  course 
to  their  ambition  to  make  the  part}'  and  themselves 
great  in  peace  as  well  as  in  war,  which  resulted  in  stu- 
pendous schemes  for  corporations,  railroads,  i)ublic 
buildings  and  other  internal  impi-ovements,  and  the 
creation  of  hundreds  of  millions  of  debt,  with  a  reck- 
lessness before  unknown  in  this  countr}'.  This  was  not 
born  of  intlation,  but  of  that  spirit  of  aggression  and 
the  love  of  display  and  power  for  which  that  party  is 
noted.  This  intense  ambition  radicalized  everAlhinii. 
The  Republican  spirit  spread  into  every  nook  and  cor- 
ner of  the  republic  and  the  idea  of  progress,  the  pet 
ambition  of  that  party,  became  the  inspiration  of  the 
times.  States,  cities,  counties,  school  districts,  cor- 
porations and  individuals  followed  in  the  wake  of  Re- 
publican leaders  after  progress,  and  the  result  has  been 
millions  upon  millions  expended  upon  all  kinds  of  en- 
terprises and  the  piling  up  of  mountains  of  debt. 

During  the  process  of  the  contraction  of  the  currency 
credit  took  the  place  of  money.  The  ambitions,  hopes 
and  extravagancies  of  the  times  together  with  the  effort 
of  credit  to  till  the  vacuum  caused  by  the  retirement  of 


198        CONTRACTIOX  OF  THE  CURRE>XY  : 

$1,000,000,000  from  the  business  world,  exj^lains  the 
mystery  of  the  burden  of  debt  which  has  pressed  so 
hard  upon  the  country. 

These,  then,  are  the  true  causes  of  the  vast  indebt- 
edness of  the  country :  First,  the  effort  of  credit  to 
fill  the  vacuum  produced  by  the  unprecedented  contrac- 
tion of  the  currency  in  18(30  and  1867  and  since.  Sec- 
ond, the  full-grown  Republican  idea  of  progress,  re- 
ceivinn^  di2:nitv  and  strength  from  the  grand  successes 
of  that  party,  took  deep  root  among  the  people  and  in- 
spired them  Avith  an  overweening  ambition  for  great 
efforts  and  display,  causing  corporations  and  individuals 
to  expend  money  and  contract  debts  with  lavish  hands 
upon  enterprises  too  great  to  be  held  well  in  hand  and 
too  expensive,  many  of  them,  to  yield  profits. 

These  things,  the  contraction  of  currency  and  the  ex- 
travao-ant  ambitions  succeeding  the  war,  have  built  up 
a  mountain  of  debt  sublime  in  its  proportions  and 
dreadful  to  contemplate.  National  debt  $2,000,000,- 
000.  State,  municipal  and  railroad  debts  about  $4,- 
000,000,000.  The  debts  of  630,000  traders  and  manu- 
facturers were  estimated  by  the  Monetary  Commission 
at  $13,000,000,000.  The  liabilities  of  banks,  mining 
and  other  corporate  companies,  mechanics,  workmen, 
professional  men  and  farmers  cannot  be  ascertained, 
but  we  think  $7,000,000,000  a  low  estimate  for  them. 
The  raort^ao-es  on  real  estate  indicate  an  enormous  sum 
of  debts  of  those  classes.  The  amount  of  mortgages  on 
real  estate  existing  in  a  few  counties  where  no  peculiar 
conditions  exist,  ascertained  to  be  about  half  the  assessed 
value  of  the  real  property  thereof ,  indicate  the  aggregate 
inort'T^aires  to  be  about  half  the  aggregate  assessed  value 


IT  CAUSED  THE  COUNTRY'S  INDEBTEDNESS.  199 

of  real  estate  in  the  U.  S.  for  1870.     This  alone  would 
give  nearly  $5,000,000,000  of  mortgaged  debts. 

Summing  up  the  foregoing  we  put  the  aggregate  in- 
debtedness of  all  kinds  and  of  all  classes  of  people  in 
the  United  States  at  not  less  than  $25,000,000,000. 
Two  and  one-half  times  the  present  commercial  value 
of  all  the  property,  and  thirty  times  the  money  in  this 
debt-ridden  land  !  This  is  astounding,  and  the  esti- 
mate may  seem  chimerical  to  some,  but  if  any  will  pro- 
ceed to  ascertain  the  indebtedness  of  individuals  he  will 
be  soon  amazed  at  the  numl)er  and  amount  of  private 
debts,  of  which  the  public  has  not  even  a  suspicion, 
much  less  accurate  information.  How  is  this  gigantic 
indebtedness  to  be  discharged?  With  money.  With 
much  money  only. 


CHAPTER  XII. 


THE  DEBTOR  CLASS  ;  EFFECTS  OF  CONTRACTION  ON  THEM. 

As  has  been  stated  before,  the  mass  of  mankind 
transact  business  with  reference  to  existing  facts.  Pur- 
chases on  credit  are  made  in  view  of  existing  prices. 
Prices  are  affected  by  the  amount  of  money  in  circula- 
lation.  When  there  is  much  money,  prices  are  high; 
when  there  is  little,  they  are  low. 

A  bought  land  for  $20  per  acre  in  18G7,  when  there 
was  more  money  than  now,  and  when  credits  were 
easily  obtained.  He  paid  half  cash  and  gave  his  notes 
due  in  ten  years,  with  interest,  for  the  balance.  The 
extension  of  credit  Avhich  followed  contraction,  collapsed 
in  1873,  and  is  not  sufficient  now  to  sustain  prices  as  it 
did  from  1867  to  1871-77.  He  cannot  get  credit.  The 
full  effects  of  contraction  on  prices  are  noAv  seen.  The 
land  is  worth  only  $10  per  acre.  He  loses  all  he 
actually  invested.  His  ability  to  pay  is  reduced  half, 
which  is  equivalent  to  a  doubling  of  the  del)t.  He  is 
unable  to  pay.  His  home  is  sold  to  pay  the  debt.  He 
is  financially  ruined  and  his  family  are  turned  out 
homeless  and  penniless.  By  the  same  process,  the  mer- 
chant, the  sliopkceper,  the  trader  is  reduced  to  poverty. 
The  long  lists  of  bankruptcy  cases  pending  in  the  Fed- 
eral courts  exhibit  the  effects  of  contraction  on  the 


EFFECTS  OF  CONTRACTION  ON  THEM.  201 

debtor  class.  Thousands  of  men  l)ou<j:lit  homos  during 
the  high  prices  of  property  from  18<)()  to  1870,  paying 
part  and  oivini:;  notes  and  niortixaixes   for  the  bahince. 

J.  ~  o  or? 

During  and  after  the  crisis,  in  1873,  Avhen  the  credit 
which  had  so  powerful  I3'  sustained  prices  prior 
to  that  time,  had  been  cut  off,  property  fell  to  half  its 
former  value.  The  notes  became  due.  The  debtor 
could  not  get  further  credit.  There  was  little  sale  for 
propert}'.  The  mortgages  were  foreclosed  and  the 
debtor  ruined.  Such  cases  are  familiar  all  over  the 
Western  States.  In  the  South  millions  of  acres  were 
sold  for  taxes.  The  appalling  increase  of  bankrupt- 
cies since  the  system  of  contraction  set  in,  in  18GG,  more 
forcibly  illustrates  the  terrible  effects  of  a  declining 
volume  of  money  on  tlie  business  and  debtor  classes 
than  tongue  or  pen  can.  In  1865  they  were  530  in 
number  with  $17,625,000  liabilities,  from  which  they 
have  increased  to  about  9,000,  with  lial)ilities  over  $190,- 
000,000  for  each  of  the  years  1876  and  1877.  Of  8G  rail- 
roads, of  14,179  miles  length  in  the  aggregate,  the  cap- 
ital stock  of  which  M'as  $912,509,000,  30  were  sold 
under  mortgage,  receivers  were  appointed  for  4(),  and 
10  defaulted  in  i)avini»:  interest  or  moi'tirao'es. 

The  English  historian  Doubleday  states  the  terrible  ef- 
fects of  contraction  on  private  fortunes  in  England  from 
1819  to  1823,  so  forcibly,  and  it  illustrates  the  condi- 
tion of  affairs  in  this  country  so  perfectly  that  I  give 
it  here  : 

"I  Avas  myself  personally  acquainted  with  one  of  the 
victims  of  this  terrible  measure  (referring  to  Sir 
Robert  Peel's  bill  for  resumption  of  specie  payments). 
He  was  a  schoolfellow,  and  inherited  a  good  fortune, 
made  principally  in  the  West  Indies.  On  coming  of 
age  and  settling  with  his  guardians,  he  found  himself 


202  THE    DEBTOK   CLASS  : 

possessed  of  fully  forty  tbo^usand  poiincTs ;  and  witk 
thi^  he  resolved  to  Durchuse  an  estate,  to>  Kuirry  and  to- 
settle  for  life. 

*'He  was  a  young  man  addicted  to  no  vkes,  of  a  fair 
understandinir,  and  a  most  excellent  heafft^  and  was 
connected  Avith  friends  hiii;!!  in  rank  and  likelyto  afford 
him  ever  i)roper  assistance  and)  advice.  The  estate 
Was  purchased,  I  believe,  about  the  year  1812' or  1813, 
for  eighty  thousand  pounds,  one  moiety  of  thepurchase 
money  l)eing  borrowed  on  mortgage  of  the  land  bought. 
In  1822-23  he  was  compelled  to  part  with  the  estate  in 
order  to  pay  off  his  mt)rtgage  and  some  arrears  of  in- 
terest ;  and  when  this  was  done  he  was  left  without  a 
shillinjx,  the  estate  brinixiuir  only  half  its  cost  in  1812  ! 
Thus,  Avithout  imprudence  or  fault  of  any  kind,  was 
this  amial)le  man,  together  with  his  family,  plunged  m 
irrctrieval)le  and  inevitable  ruin,  by  the  act  of  a  legis- 
lature which  ought  to  have  protected  both,  and  which 
was  fully  warned  of  the  consequences  of  what  it  was 
about  to  do  ;  but  which,  in  requital,  chose  to  laugh 
those  who  warned  to  utter  scorn.  My  readers  must 
not  suppose  that  this  was  either  an  exaggerated  or  un- 
common case.  On  the  contrary,  the  country  teemed 
with  sinnlar  examples,  and  on  the  commencement  of 
the  session  of  1823,  the  tables  of  l)()th  Houses  were 
loaded  with  petitions,  detailing  scenes  of  hardship  and 
destitution  appalling  in  the  extreme.  As  a  sample  of 
the  whok^,  I  have  selected  one  which  most  fully  ex- 
hibits the  dreadful  effects  of  this  infatuated  measure 
upon  the  welfare  and  hap})iness  of  the  coinnmnity ; 
aiKl  of  this  petition  I  here  insert  as  complete  an  ab- 
stract as  I  can  frame.  The  substance  of  this  very  ex- 
traordinary document  was  as  follows.  It  was  presented 
to  the  Commons  by  Lord  Folkstone,  and  to  the  Lords 
Tjy  Earl  Stanhope. 

<' It  sets  forth: 

'<  '1.  That  tiie  petitioner,  having  contributed  both  in 
< purse  and  person  to  the  maintenance  of  the  State,  had 
'  ft  right  to  expect  protection  of  person  and  property  in 


EFFECTS  OF  COXTItACTION  ON  THEM.  203 

return  ;  but  that  instead  of  this,  he  is  ruined  hy  act  of 
the  Parliament. 

"  '2.  That  he  imputes  no  intentional  wrong-doing, 
but  grievous  error  to  the  Govenment ;  yet  he  hopes  the 
Government  will  not  change  error  into  inju>iice  by  per- 
severini;  in  it. 

"  'o.  That  the  petitioner's  ruin,  as  Avell  as  that  of 
thousands  of  other  persons,  arose  from  Peel's  bill  for 
returning  to  cash  i)ayments  ;  but  that  few  cases  can  ex- 
ceed his  in  hardship. 

"  '4.  That  the  petitioner  and  his  father  were  wine 
merchants,  and  made  a  large  fortune,  with  i)art  of 
which,  in  1811  and  1812,  they  bought  land. 

♦''5.  That  they  bought  the  estate  of  Northaw,  in 
Herefordshire,  for  £(i2,000,  and  laid  out  £10,000 
more  in  improvements,  investing  in  all  £72,0(.0. 

"  m;.  That  in  1812  they  bargained  with  John  A* 
Trenchard,  Doctor  of  Divinity,  for  the  estate  of  Pontry- 
las,  for  whieh  they  agreed  to  give  £(iO,00(),  paying  £5555 
as  a  deposit.  That  the  title  not  being  satisfactory  the 
result  was  a  suit  at  law,  which  was  not  decided  until 
181i»,  when  judgment  went  against  them,  awanlinur  a 
gross  sum  of  £71,957  lit.s\  bit.  to  Dr.  Trenchard,  be- 
ing purchase  money  and  interest. 

"'7.  That  in  the  mean  time  petitioners  had  experi- 
enced heavy  losses  in  trade,  and  could  not  i)ay  this  sum  ; 
and,  therefore,  gave  Dr.  Trenchard  a  mortgage  on  6o/A 
the  estates  of  Northnw  and  I'oinrylas  for  £»>."^( )()(). 

♦  *X.  That  after  1819,  when  the  suit  ended,  petitioner 
and  liis  father  paid  £5,()0()  in  part  of  the  debt,  and- 
£8,000  interest  up  to  1821. 

"  '9.  That  on  the  suit  ending  in  1819,  they  received- 
up  to   1821,   out  of  the  estate,  for  rent  and   wood", 
£3,410. 

***1().  That  in  July,  1821,  the  two  estates  were 
offered  for  sale,  but  would  not  bring  the  siun  for  which 
they  ivere  mortgaged. 

"'11.  That  in  1821  petitioner  and  his  father  were 
bankrupts. 


204  TirR    DEBTOR    CLASS. 

"'12.  That  Di*.  Trenchard  then  got  possession  of 
both  estates,  and  gave  notice  to  fordose  tJie  mortgage. 

"'13.  That  petitioner  and  his  father  thus  actually 
paid  Trenchard  £18,555,  and  have  only  received  out 
of  the  estate  £3,410  ;  and  they  are  now  about  to  loose 
both  the  estates  of  Pontrylas  and  ISorthaw  ;  the  last 
which  cost  £72,000. 

"  '14.  That  Trenchard,  on  the  other  hand,  has 
received  in  cash  £18,555,  with  all  the  rents  of  Pon- 
trylas from  1812  to  1819,  and  that  he  is  now  about  to 
get  the  two  estates,  with  all  arrears  of  rent  from  Feb- 
ruary, 1820,  in  lieu  of  his  debt  of  £60,000. 

" '15.  That  petitioner's  assignees  are  praying  the 
Court  of  Chancery  not  to  allow  this,  for  that  if  it  be 
granted,  the  result  will  be  that  Dr.  Trenchard  will  have 
received  all  the  rents  and  protits  of  Pontrylas  estate, 
except  for  two  years,  £1,470  for  timber,  £18,555  in 
cash  from  the  petitioner,  and  in  addition  to  his  own 
original  estate  of  Pontrylas,  he  Avill  also  have  got  the 
other  estate  of  Northaw,  which  cost  £72.000, 

"  '  1(>.  That  petitioner  and  his  father  had  other  estates 
in  Middlesex,  Essex  and  Hanishire,  which  cost  £36,- 
000,  but  have  now  been  sold  for  £12,000  !  That  by 
the  depression  in  trade  they  became  bankrupts.  That 
petitioner's  father  died  in  1822  of  a  l)roken  heart,  and 
that  he  is  himself  a  ruined  man,  with  with  seven  child- 
ren of  his  own,  ten  of  his  brother's  and  seven  of  his 
sister's,  all  depending  on  him. 

"  '17.  That  petitioner,  therefore,  prays  for  an  equi- 
table adjustment  of  this  and  all  similar  contracts.' 

"This  petition  was  that  of  Charles  Andrew  Thomp- 
son, of  Chesewick,  in  the  County  of  Middlesex,  and  is 
certainly  calculated  to  tear  in  pieces,  .almost,  the  heart 
of  every  just  and  sensible  man  that  reads  it." 


CHAPTER  Xni. 


THE    CREDITOR   CLASS  : 
EFFECTS    OF  CONTRACTION    ON   THEM. 

It  has  been  common  for  the  creditor  class,  and  all 
who  embrace  the  theories  of  buUionists,  to  argue  that 
an  increase  of  the  volume  of  money  lessens  the  value 
or  purchasing  power  of  money,  reduces  the  value  of 
debts  in  the  hands  of  holders,  and  is  therefore  injustice 
and  an  injury  to  the  creditor.  This  proposition  is  not  an 
axiom  by  any  means.  In  fact,  it  is  attended  with  much 
doubt.  If  the  only  thing  the  creditor  intended  to  do 
Avas  to  collect  and  lay  the  money  out  in  realized  wealth, 
houses  and  lands,  and  hold  them,  the  proposition  would 
be  in  part  true.  But  such  is  not  the  common  object  of 
creditors.  They  look  to  money  profits,  interest,  safe, 
paying  investments.  Interest  and  profits  on  loans 
depreciate  with  a  contraction  of  the  currency.  This  is 
evidenced  by  the  low  rate  of  interest  at  which  govern- 
ment bonds  were  sold  in  England  during  the  scarcity 
of  money  there,  after  resumption  in  1820,  and  it  is 
evidenced  in  this  country  now  by  the  rapid  sale  of  four 
per  cent,  bonds.  Below  we  give  a  table  of  the  rate  of 
interest  in  New  York,  as  appears  in  the  report  of  the 
comptroller  of  the  currency,  and  one  of  the  ratio  of 
earnings  to  capital  and  sur[)lus  of  the  national  banks 
from  March,  1869,  to  September,  1877,  taken  from  the 


206  THE  CREDITOR  CLASS  : 

annual  report  of  the  comptroller  of  the  currency,  for 

1877. 

TABLE   OF   RATES    OF    INTEREST. 

1874,  call  loans,  3.8  per  cent. ;  commercial  ])aper,  6.4  per  cent. 

1875,  call  loans  3.0  per  cent. ;  commercial  paper,  5  6  per  cent. 
187(),  call  loans,  3.3  per  cent. ;  commeicial  paper,  5.3  per  cent. 
1877,  call  loans,  3.0  per  cent. ;  commercial  paper,  5  2  per  cent. 

TABLE  OF  RATIO  OF  BANK  E.mXINGS  TO  CAPITAL  AND  SURPLUS. 

March,  1 8G9  to  September,  1 8G9 6  0  per  cent. 

September,  18U9  to  March,  1870   5.8  '■ 

March,  1870  to  -eptember,  1870   5.2  " 

September,  1870  to  March,  1871 5  2  ' 

March,  1871  to  September,  1871    5  0  " 

September   1871  to  March,  1872 5.0  '* 

March,  1872  to  Sipteraber,  1872 5.4  " 

September,  1872  to  March,  1873 * 5.4  '• 

March,  1873  to  .September,  1873 5.5  '' 

September,  1873  to  March,  1874 4.8  '* 

Maich,  1874  to  September,  1874 4.9  " 

Sepi ember,  1874  to  March,  1875 4.7  " 

March,  1875  to  September,  1875 ...4.6  " 

September,  1875  to  March,  1876 3  6  " 

March,  1876  t  >  September,  1876 3.3  '* 

September,  1876  to  March,  1877 3  1  " 

March,  1877  to  September,  1877 2.5  " 

This  table  shows  a  large  decrease  from  1869  to  1877, 
during  which  time  there  was  a  contraction  of  the  cur- 
rency $80,000,000,  and  in  1873  a  collapse  of  credit, 
which  has  not  recovered  since.  It  will  be  observed  in 
the  table  that  the  smallest  earnings  before  the  panic  of 
1873  was  in  1871.  This  exactly  corresponds  witli  the 
greatest  contraction  of  the  currency  between  1869  and 
1873.  We  take  the  experience  of  the  national  banks 
as  an  exemplification  of  the  universal  fall  of  interest, 
attending  contraction,  except  on  loans  to  unsafe  bor- 
rowers. As  has  been  said  before,  the  full  effects  of 
contraction  were  not  felt  until  in  1873,  when  the  panic 
came  and  cut  oif  credit.  So,  from  that  year  on,  the 
banks  have  experienced  the  effects  of  contraction  in  a 
very  great  decrease  of  earnings.  Then,  one  of  the 
injuries   to    creditors   which   contraction   brings,  is   a 


EFFECTS  OF  CONTRACTION  ON  THEM.       207 

great  depreciation  of  interest  profits.  The  magni- 
tude of  this  depreciation  of  interest  is  determined  prin- 
cipally by  the  extent  of  contraction  and  destruction  of 
credit. 

There  is  another  great  injury  done  to  creditors  by 
contraction,  which  is  commonly  overlooked.  It  is  the 
total  or  partial  annihilation  of  the  value  of  debts. 
While  the  number  of  dollars  which  the  debts  calls  for, 
would,  if  realized,  possess  greater  purchasing  power  in 
times  of  contraction  than  in  times  of  inflation,  yet, 
contraction  often  so  reduces  the  debtor's  profits  and 
the  value  of  his  property  as  to  render  him  unal)le  to 
pay.  Then  the  creditor  must  sue  him  or  sell  him  out 
under  mortgage  and  realize  one-half  or  three-fourths 
of  his  del>t,  or  buy  the  property  in,  and  be  encumbered 
with  a  lot  of  troublesome,  tax-bearing,  unproductive 
property,  which  has  scarcely  any  marketable  value. 
Besides  this,  the  great  increase  of  cases  in  bankruptcy  in 
times  of  contraction,  increases  the  creditor's  liability 
to  loss,  by  the  debtors  going  voluntarily  or  being 
forced  into  bankruptcy. 

While  contraction  reduces  the  volume  of  money,  and 
thus  reduces  the  ability  of  all  to  pay,  it  never  brings  a 
corresponding  decrease  of  the  rate  of  taxation,  and  is 
thereby  another  means  of  loss  to  the  creditor  as  well 
as  the  debtor.  On  the  other  hand,  while  inflation 
reduces  the  purchasing  power  of  money  and  thereby 
reduces  the  relative  value  of  debts,  it  greatly  modifies 
the  disadvantages  enumerated,  increases  interest  and 
profits,  better  enables  the  debtor  to  pay,  multiplies 
opportunities  for  the  safe  and  profitable  investment  of 
capital,  and  thus,  itself,  compensates  the  creditor  class 
in  several  directions  for  the  injury  supposed  to  be  in- 


208  THE  CKEDITOR  CLASS. 

flicted  upon  them  in  another.  Taking  the  sum  of  re- 
sults of  moderate  inflation  to  the  creditor  class  there 
is  no  injury  or  injustice  done  to  them  by  it.  This  is 
amply  evidenced  by  the  vast  profits  of  capital  during 
our  flush  times.  Contraction  has  in  this  country  caused 
great  depreciation  of  the  value  of  municipal,  railroad, 
and  other  corporation  bonds  and  stocks,  and  greatly 
injured  all  of  the  holders  of  such  securities  and  ruined 
many.  The  only  creditors  benefited  hy  such  a  contrac- 
tion of  the  currency  as  we  have  had,  are  those  who 
hold  firs-t-class  bonds.  Even  those  holdinsj  bonds  of 
some  of  the  states  have  lost  heavily  on  account  of  the 
inability  of  the  latter  to  pay. 

We  therefore  conclude  that  while  contraction  injures 
all,  a  reasonable  expansion  of  the  volume  of  money 
injures  none,  but  greatly  benefits  the  great  body  of  the 
people,  especiall}^  the  debtor,  commercial,  industrial 
and  laboring  class. 


CHAPTER  XIV. 


CONTRACTION ITS    GENERAL    EPFECTS. 

BRIEF    ARGUMENTS    AGAINST    IT. 

There  is  not  gold  and  silver  enough  in  the  United 
States,  even  if  the  Government  could  command  every 
dollar  of  it,  to  redeem  the  outstandhig  legal  tenders. 
If  thev  are  redeemed  it  must  be  done  by  a  resort  to 
strategy  ;  that  of  trading  interest-bearing  bonds  for 
lec:al  tenders. 

This  would  effect  a  destruction  of  our  legal  tender 
paper  money,  and  increase  our  bonded  indebtedness, 
without  placing  a  dollar  of  coin  in  circulation  to  take 
the  place  of  the  paper.  There  is  not  now,  nor  is  there 
likely  to  be,  coin  enough  in  the  United  States  to  sustain 
$300,000,000  of  national  bank  issues.  Under  existing 
circumstances,  the  vast  indebtedness  of  the  country, 
$135,000,000  of  coin  interest  to  pay  annually  to  for- 
eign capitalists,  and  the  uncertain  tenure  by  which  we 
hold  foreign  commercial  balances,  we  cannot  hope  for 
the  accumulation  of  a  large  stock  of  coin.  Before  the 
war,  when  our  country  owed  no  foreign  debt,  our  stock 
of  coin  never  reached  $300,000,000.  Under  the  ad- 
verse circumstances  against  the  country  now,  the  prob- 
abilities are  that  our  stock  of  coin  cannot  reach  that 
sum  for  years  to  come.     When  all  the  legal  tenders 


210  CONTRACTION ITS  GENERAL  EFFECTS 

shall  have  been  redeemed,  the  national  banks  must  then 
bank  on  coin.  Every  dollar  of  their  issues  will  be 
redeemable  in  coin.  If  we  should  be  so  fortunate  as 
to  accumulate  a  stock  of  $300,000,000  of  coin,  which 
we  believe  impossible  for  years  to  come,  then  the  bank 
issues  could  not  safely  exceed  $225,000,000  to  $250,- 
000,000,  a  sum  but  little  over  one-third  of  our  present 
volume  of  currency.  Such  a  contraction  of  the  cur- 
rency would  utterly  ruin  the  business  of  this  country. 
It  would  produce  a  revolution.  But  suppose  the  banks 
then  would  hold  $75,000,000  of  coin  as  reserves,  and 
the  other  $225,000,000  should  circulate  among  the 
people  :  this  is  the  most  sanguine  supposition  we  could 
entertain.  Even  then  our  total  volume  of  circulating 
money,  both  paper  and  coin,  would  be  only  $450,000,- 
000  to  $475,000,000.  This  would  be  less  than  the 
present  volume  of  money  actually  circulating.  So 
small  a  sum  could  not  serve  all. 

Money,  like  other  things,  is  hard  to  get,  is  within  the 
reach  of  few,  when  scarce  and  dear ;  but  when  plenti- 
ful, it  is  cheap,  and,  like  every  other  cheap  article,  is 
within  the  reach  or  command  of  a  much  larger  number 
of  people  than  when  scarce  and  dear.  It  might  be 
made  so  scarce  that  it  would  be  very  dear,  and  as  hard 
to  command  as  diamonds.  Who,  then,  but  the  wealthy 
could  possess  it? 

If  past  finance  history  and  experience  be  any  index 
to  the  future,  even  this,  the  most  hopeful  condition 
that  can  be  looked  for,  must  inevitably  result  in  a  fur- 
ther continuing  shrinkage  of  values,  reduction  of  pro- 
fits, business  and  wages,  and  increase  of  bankruptcies, 
crime  and  pauperism,  until  the  volume  of  money  sinks 
to  about  the  sum  above  stated.     To  reach  that  point,  a 


bijip:f  argumexts  against  it.  iM  1 

journey  of  three  or  four  years  over  a  rough  and  rugged 
road,  flanked  on  either  side  by  chasms  and  pitfalls  of 
ruin,  awaits  the  country.  Along  that  cheerless  and 
desolate  wav  will  be  strewn  wrecks  of  ruined  fortunes, 
expiring  corporations,  collapsed  banking  houses,  un- 
tenanted homes,  abandoned  factories,  rusted  and 
wasted  machinery,  vacant  stores  and  warehouses,  and 
rotten  hulls.  State,  municipal  and  corporation  stocks 
and  bonds  will  be  hawked  about  among  the  groups  of 
money-mongers  as  worthless  bits  of  paper.  Tales  of 
woe  will  be  written  in  nnnigagee's  sale  notices,  posted 
on  abandoned  and  desolate  houses  and  along  the  dull 
and  heavvhisfhwavs.  The  workman's  tools  will  become 
dull  and  silent,  and  the  auctioneer's  hammer  be  heard 
resoundins:  from  mornins:  till  niirht.  Povertv  and  want, 
clad  in  rags,  and  pinched  with  hunger,  will  swarm  as 
the  locusts  of  Egypt  to  devour  the  country.  Beneath 
the  whole,  the  smouldering  tires  of  wrath  and  revenge 
of  an  oppressed  and  tortured  people  will  be  ready  to 
spring  up  into  consuming  flames  of  destruction  !  Is  the 
country  prepared  for  this?  Can  it  afford  to  take  the 
chances,  or  even  risk  the  possibility  of  such  a  catastro- 
phe? 

If  the  government  persists  in  enforcing  the  Resump- 
tion Act,  disaster  is  inevitable.  The  ridicule  of 'the 
bullionists,  the  fine-spun  theories  of  gold  worshippers, 
cannot  avert  the  pending  calamities,  or  change  the  na- 
tural laws  of  finance  and  commerce.  Like  the  pyramids 
of  Egypt,  standing  the  test  of  ages,  the  unchanging 
laws  of  money  and  trade,  and  the  exi)erience  of  all  coun- 
tries, broad-based  and  indestructible  tower  to  the 
heavens  as  land-marks  for  the  nations,  A  decreasing 
volume  of  money  brings  misery ;  an  increasing  volume 


212  CONTRACTION ITS  GENERAL  EFFECTS. 

of  money  brings  prosperity  and  happiness.  This  great 
truth  is  indelibly  "written  on  the  pages  of  History.  Ex- 
perience of  all  commercial  nations  attests  it. 

AUTHORITY      EMPHASIZES     AVHAT     EXPERIENCE     TEACHES. 
[Froin  the  Report  of  the  Monetary  Commisision.] 

"The  two  metals  together  till  but  scantily  the  meas- 
ure of  the  money  needs  of  the  country.  In  the  whole 
histor}'  of  the  human  race,  not  a  single  instance  can 
be  pointed  out  of  a  fall  in  the  value*  of  either  or  both  of 
the  metals  Avhich  has  not  proved  a  benefaction  to  man- 
kind, while  on  the  other  hand,  during  every  period, 
whenever  a  rise  in  the  value*  of  metalic  money  has  oc- 
curred, it  has  been  attended  hy  financial,  industrial, 
political  and  social  disaster.  An  increasing  value  of 
money  and  falling  prices  have  been  and  are  more  fruit- 
ful of  human  misery  than  war,  pestilence  or  famine. 
They  have  Avrought  more  injustice  than  all  the  bad 
law\s  which  were  ever  enacted.  The  steadiness  of  gen- 
eral prices  can  only  be  maintained  when  money  and  pop- 
ulation increase  in  equal  relative  proportions.  General 
prosperity  and  a  general  fall  in  prices  never  did  and 
never  can  co-exist. 

"The  suspensions  of  specie  payment  in  Russia  (in 
1857),  in  the  United  States  (in  1862),  and  in  Italy  (in 
18()t5),  all  within  twenty  years,  not  only  liberated  a 
very  hirge  amount  of  specie,  wdiieh  was  exported  to 
specie-paying  countries,  but  cut  off  the  demand  of  the 
suspending  countries  for  the  supplies  of  gold  and  silver 
which  woukl  have  been  required  to  keep  up  their  stock 
of  money  if  it  had  remained  metalic.  Were  it  not  for 
this  extraordinary  supply  and  decreased  demand,  it  is 
more  than  prolxihle  that  the  specie  prices  of  commod- 
ities would  now  range  lower  than  they  did  in  1849.  It 
is  certain  that  a  resumption  of  specie  payments  in  all 
or  either  of  these  countries  would  make  .such  a  demand 
for  specie  its  would  greatly  appreciate  its  value,  and 
force  prices  to  a  much  lower  leve?. 

♦Purchasing  power  over  property. 


BRIEF  ARGUMENTS  AGAINST  IT.  213 

"Duriiii!;  certain  periods  in  the  past  when  prices  have 
been  falling,  by  reason  of  a  shrinlcage  in  the  volume  of 
money,  a  slow  and  toilsome  advance  has  been  made  in 
the  accumulation  of  wealth.  Under  such  condi- 
tions its  just  distribution  is  impossible.  A  shrinking- 
volume  of  money  and  falling  prices  always  have  had 
and  always  must  have  a  tendency  to  concentrate  wealth, 
to  enrich  the  few,  and  to  impoverish  and  degrade  the 
many.  This  tendency  is  subtle,  active  and  portentous 
throughout  the  world  to-day. 

"On  a  comparison  with  any  country  on  a  mctalic 
basis,  $500, 000, 000  is  the  least  amount  of  mctalic 
money  that  can  be  assumed  to  be  suificient  for  this 
country  in  the  event  of  resumption.  It  is  in  the  shadow 
of  a  shrinking  volume  of  money  that  disorders,  social 
and  political,  gender  and  fester,  that  communism  or- 
ganizes, that  riots  threatc  i  and  destrov,  that  labor 
starves,  that  capitalists  conspire  and  workmen  combine, 
and  that  the  revenues  of  government  are  dissipated  in 
the  employment  of  la1)orers  or  in  the  nuiintainance  of 
increased  standing  armies  to  over-awe  them.  The 
peaceful  conflict  which  under  a  just  money  s^^stem  is 
continually  waged  between  money,  capital  and  labor, 
and  which  only  tends  to  secure  the  rights  of  each,  is 
chan<2;ed  under  a  shrinking  volume  of  moiiev  to  an  unre- 
lentinii"  war,  threatening  the  destruction  of  both. 

The  mischief  which  practically  threatens  the  world, 
and  Avhich  has  been  the  most  prolific  cause  of  the  social, 
political  and  industrial  ills  which  have  atilicted  it,  is 
that  of  a  decreasing  and  deficient  money.  It  is  from 
such  a  deficiency  that  mankind  are  now  suffering,  and 
it  is  the  actual  and  present  evil  with  which  we  have  to 
deal. 

From  David  Hume's  Essay  on  Money : 

*'It  is  certain  that  since  the  discovery  of  the  mines 
in  America  industry  has  increased  in  all  the  nations  of 
Europe.  *  *  We  find  that  in  every  kingdom  into 
which  money  begins  to  How  in  greater  abundance  than; 


214  CONTRACTION ITS    GENERAL    EFFECTS. 

formerly,  everything  takes  a  new  face  ;  labor  and  in- 
dustry gain  life  ;  the  merchant  becomes  more  enter- 
prising, the  manufacturer  more  diligent  and  skillful, 
and  even  the  farmer  follows  his  plow  with  greater 
alacrity  and  attention.  *  *  The  good  policy  of  the 
magistrate  consists  only  in  keeping  it,  if  possible,  still 
increasing ;  because  by  that  means  he  keeps  alive  a 
spirit  of  industry  in  the  nation  and  increases  the  stock 
of  labor,  in  which  consists  all  real  power  and  riches. 
A  nation  whose  money  decreases  is  actually  at  that  time 
weaker  and  more  miserable  than  another  nation  which 
possesses  no  more  money,  but  is  on  the  increasing 
hand." 

Alexander  Hamilton,  in  his  report  (1791)  on  the 
mint,  says : 

*'  To  annul  the  use  of  either  of  the  metals  as  money 
is  to  abridge  the  quantity  of  circulating  medium,  and 
is  liable  to  all  the  objections  which  arise  from  a  com- 
parison of  the  benefits  of  a  full  with  the  evils  of  a 
scanty  circulation." 

AYilliam  H.  Crawford,  Secretary  of  the  Treasury, 
in  a  report  (February  12th,  1820),  to  Congress,  says : 

"All  intelligent  writers  on  currency  agree  that  when 
it  is  decreasing  in  amount,  poverty  and  misery  must 
prevail." 

Mr.  R.  M.  T.  Hunter,  in  a  report  (1852)  to  the 
United  States  Senate,  says : 

"Of  all  the  great  effects  produced  upon  human  so- 
ciety by  the  discovery  of  America,  there  were  probably 
none  so  marked  as  those  brought  about  by  the  great 
influx  of  the  precious  metals  from  the  New  "World  to 
the  Old.  European  industry  had  been  declining  under 
the  decreasing  stock  of  precious  metals,  and  an  appre- 
ciating standard  of  values  ;  human  ingenuity  grew  dull 
under  the  paralyzing  influences  of  declining  profits, 
and  capital  absorbed  nearly  all  that  should  have  been 
divided  between  it  and  labor.     But  an  increase  in  the 


BRIEF    ARGUMENTS    AGAIXST    IT.  215 

precious  metals,  in  such  quantity  as  to  check  this  tend- 
ency, ()i)erated  as  a  now  niotiv(»-powcr  to  the  machinery 
of  commerce.  Production  was  stimulated  by  tinding 
the  advantaires  of  a  chauije  of  the  standard  on  its  side. 
Instead  of  being  repressed  by  iiaving  to  pay  more  than 
it  had  sti[)ulatcd  for  the  use  of  capital,  it  was  stim- 
ulated by  ])aying  loss.  Capital,  too,  was  benefited,  for 
new  demands  were  created  for  it  by  the  new  uses  which 
a  general  movement  in  industrial  pursuits  had  devel- 
o})ed  ;  so  that  if  it  lost  a  little  by  a  change  in  the  stand- 
ard, it  o-ained  much  more  in  the  ijreater  demand  for  its 
use,  whieh  added  to  its  capacity  for  reproduction,  and 
to  its  real  value, 

"The  mischief  would  be  great,  indeed,  if  all  the 
world  were  to  adopt  but  one  of  the  precious  metals  as 
a  standard  of  value.  To  adopt  gold  alone  would 
diminish  the  specie  currency  more  than  one-half;  and 
the  reduction  the  other  way,  should  silver  be  taken  as 
the  only  standard,  would  be  large  enough  to  prove 
highly  disastrous  to  the  human  race." 

The  Encylopoedia  Britannica,  1859,  (article  Precious 

Metals,  by  J.  R.  McCuUoch,)  says  : 

"A  fall  in  the  value  of  the  precious  metals,  caused 
by  the  greater  facility  of  their  ])i-oduction,  or  by  the 
discovery  of  new  sources  of  supply,  depends  in  no  de- 
gree on  the  theories  of  philosophers,  or  the  deeisions 
of  statesmen  or  legislators,  but  is  the  residt  of  circum- 
stances beyond  human  control  ;  and  although,  like  a 
fall  of  rain  after  a  long  course  of  dry  weather,  it  may 
be  prejudicial  to  certaui  classes,  it  is  beneficial  to  an 
incomjjarably  greater  number,  including  all  Avho  are  en- 
gaged in  industrial  pursuits,  and  is,  speaking  generally, 
of  great  public  or  national  advantage." 

Ernest  Seyd,  1868,  (Bullion,  page  613,)  says: 

"Upon  this  one  point  all  authorities  on  the  subject  are 
agreed,  to  wit,  that  the  large  increase  in  the  sup[)ly  of 
gold  has  given  a  universal  impetus  to  trade,  commerce, 


216     CONTRACTION — ITS  GENERAL  EFFECTS. 

and  industry,  and  to  general  social  development  and 
progress." 

The  American  Review  (1876)  says  : 

"Diminishing  money  and  falling  prices  are  not  only 
oppressive  upon  debtors,  of  whom,  in  modern  times, 
states  are  the  greatest,  but  they  cause  stagnation  in 
busjness,  reduced  production,  and  enforced  idleness. 
Falling  markets  annihilate  profits,  and  as  it  is  only  the 
expectation  of  gain  which  stimulates  the  investment  of 
capital  in  operations,  inadequate  employment  is  found 
for  labor,  and  those  who  are  employed  can  only  be  so 
upon  the  condition  of  diminished  wa^es.  An  increasing 
amount  of  money,  and  consequently  augmenting  prices, 
are  attended  by  results  precisely  the  contrary.  Pro- 
duction is  stinmlated  by  the  profits  resulting  from  ad- 
vancing prices  ;  labor  is  consequently  in  demand  and 
better  paid,  and  the  general  activity  and  })uoyancy  in- 
sure to  capital  a  wider  demand  and  higher  remuner- 
ation." 

Leon  Fauchet,  (1843,)  in  Researches  upon  Gold  and 
Silver,  says : 

"If  all  the  nations  of  Europe  adopted  the  system  of 
Great  Britain,  the  price  of  gold  would  be  raised  beyond 
measure,  and  we  should  see  produced  in  Europe  a  result 
lamentable  enouirh." 

Before  a  French  monetary  convention  in  1869,  M. 
Wolowski  said : 

"The  sum  total  of  the  precious  metals  is  reckoned  at 
fifty  milliards,  one-half  gold  and  one-half  silver.  If, 
by  a  stroke  of  the  pen,  they  suppress  one  of  these 
metals  in  the  Jiionetary  service,  they  double  the  demand 
for  the  other  metal,  to  the  ruin  of  all  del)tors." 

These  arguments  for  the  double  standard  are  arsru- 
ments  for  more  money  and  apply  with  equal  force 
a";ainst  a  contraction  of  the  currency. 

The  specie  Kesumption  Act  is  a  fraud  and  ought  to 
be  repealed,  for  that  reason  as  well  as  others.     The 


BRIEF  ARGUMENTS  AGAINST  IT.  217 

true  character  of  that  act  was  not  understood  cither  by 
Congress  or  the  country  at  the  time  of  its  passage  as  it 
is  now  interpreted.  The  phraseok)gy  of  the  act  created 
the  impression  that  tluere  was  to  be  no  reduction  of  the 
aggregate  of  paper  money,  l)ut  that  legal  tender  notes 
were  to  be  diminished  only  as  bank  notes  were  increased. 
As  the  act  is  administered  in  practice,  both  classes  of 
notes  are  being  reduced  at  the  same  time,  while  the 
population  of  the  country  is  expanding.  The  words  of 
the  act  may  justify  this  method  of  administration,  but 
it  was  ncrt  with  that  understanding  that  it  was  sanc- 
tioned by  Congress.  This  act  is  perpetuating  the  evils 
of  the  crisis  of  1873.  It  is  constantly  diminishing 
the  currency,  reducing  values,  clogging  the  wheels  of 
commerce,  stopping  the  machinery  of  industry,  des- 
troying profits,  multiplying  bankrupts,  lowering  wages, 
pauperizing  labor,  breeding  a  myriad  of  revolutionary 
ideas,  and  inciting  riots  and  insurrections.  A  declining 
volume  of  money  is  always  attended  by  an  accumulation 
of  ills  to  human  society. 


CHAPTER  XV. 


ROMAN,  FRENCH  AND  GERMAN    FINANCES. 
ROME  :     MONETARY    AFFAIRS. 

1 

Paper  money  in  the  form  of  treasury  bills  saved 
Rome,  and  an  inadequate  supply  of  money  caused  the 
downfall  of  that  empire. 

^'The  great  contest  between  Rome  and  Carthage, 
which  Hannibal  and  Scipio  conducted,  and  Livy  has 
immortalized,  was  determined  i)y  a  decree  of  the  Senate, 
induced  by  necessity,  which  postponed  the  payment  of  all 
obligations  of  the  public  treasury  in  specie  to'^the  conclu- 
sion of  the  war,  and  thereby  created  inconvertilde  paper 
currency  for  the  Roman  Emjiire.  ]More,  even,  than 
the  slaughter  on  the  Metaurus,  the  triumph  of  Zama, 
this  decree  determined  the  fate  of  the  ancient  world, 
for  it  alone  equipped  the  legions  by  whom  those  victo- 
ries were  gained." — Alison. 

"The  censors  found  the  treasury  unable  to  supply 
the  public  service.  Upon  this,  trust  money,  belonging 
to  widows  and  minors,  or  to  widows  and  unmarried 
women,  were  deposited  in  the  treasury,  and  whatever 
sums  the  trustees  had  to  draw  for  were  paid  by  the 
quarter  in  bills  on  the  banking  commissioners,  or  tri- 
umvirs 'iiiensarii.  It  is  probable  that  these  bills  were 
actually  a  pap(!r  currency,  and  that  they  circulated  as 
money,  on  the  security  of  the  public  faith.  In  the 
same  way  the  pul)lic  contracts  were  also  paid  in  paper ; 
for  the  contractors  came  forward  in  a  body  to  the  cen- 


MONETARY   AFFAIRS.  219 

sors,  and  begged  them  to  make  their  contracts  as  usual, 
promising  not  to  demand  payment  till  the  end  of  the 
war.  This  must,  I  conceive,  mean  that  they  Avere  to 
be  paid  in  orders  upon  the  treasury,  which  orders  were 
to  be  converted  into  cash  Avhen  the  present  difficulties 
of  the  government  should  be  at  an  end." — Arnold. 

"Rome,  itself,  saved  in  its  utmost  need  by  an  ex- 
pansion, sunk  in  the  end  under  a  still  greater  contrac- 
tion of  the  national  currency.  The  fall  of  the  Roman 
Empire,  so  long  ascribed,  in  ignorance,  to  slavery, 
heathenism  and  moral  corruption,  was  in  reality  brought 
about  by  a  decline  in  the  gold  and  silver  mines  of  Spain 
and  Greece,  from  which  the  precious  metals  for  the 
circulation  of  the  world  were  drawn,  at  the  very  time 
when  the  victoi'ies  of  the  legions  and  the  wisdom  of 
the  Antonines  had  given  peace  and  security,  and  with 
it,  an  increase  in  numbers  and  riches  to  the  Roman 
Empire.  The  supi)lies  of  specie  for  the  old  world  be- 
came inadequate  to  the  increasing  wants  of  its  popula- 
tion, when  the  power  of  its  emperors  had  given  lasting 
internal  i)eace  to  its  hundred  and  twenty  millions  of  in- 
habitants. The  mines  of  Spain  and  Greece,  from 
which  the  chief  supplies  were  obtained  at  that  })eriod, 
were  worked  out  or  became  unworkable  from  the  ex- 
actions of  the  Enqjerors';  and  so  great  was  the  dearth  of 
the  precious  metals  which  thence  ensued,  that  the  treas- 
ure in  circulation  in  the  Empire,  which  in  the  time  of 
Augustus  amounted  to  £3.s(),000,0()0,  had  sunk  in  that 
of  Justinian  to  £80, 000, 000  sterling  ;  and  the  golden 
aureus,  which,  in  the  days  of  the  Antonines  Aveighed 
118  grains,  had  come,  in  the  lifth  century,  to  weigh  only 
68,  though  it  was  only  taken  in  discharoe  of  debts  and 

•  .  1  *  ^ 

taxes  at  its  original  and  standard  value.  As  a  necessary 
consequence  of  so  i)rodigioiis  a  contraction  of  the  cur- 
rency, Avithout  any  ])r()p()rtional  diminution  in  the  num- 
bers or  transactions  of  mankind,  dcljls  and  taxes,  which 
were  all  measured  in  the  old  standard,  became  so  over- 
whelming that  the  national  industry  Avas  ruined  ;  agri- 
culture disappeared,  and  Avas  succeeded  by  pasturage  in 


220  FRAMCE  : 

the  fields  ;  the  great  cities  were  all  fed  from  Egypt  and 
Libya  ;  the  revenue  became  irrevocable ;  the  legions 
dwindled  into  cohorts,  the  cohorts  into  companies  ; 
and  the  six  hundred  thousand  men  who  guarded  the 
frontiers  of  the  Empire  in  the  time  of  Augustus,  had 
sunk  to  one  hundred  and  tifty  thousand  in  that  of  Jus- 
tinian— a  force  wholly  inadequate  to  its  defence." — 
Alison. 

FRANCE  :    MOXETARY   AFFAIRS. 

The  immediate  cause,  the  occasion  which  brought 
about  the  grandest,  most  terrible,  and  bloodiest  revo- 
lution of  which  modern  history  gives  an  account,  was 
scarcity  of  money  and  oppressive  taxes.  This  was  the 
French  Revolution  of  1789.  Long  continued  feuda- 
tory  oppressions  of  the  peasantry,  mal-administration 
of  justice,  royal  prerogatives  and  corruptions  in  gov- 
ernment for  a  long  series  of  years,  spread  general  dis- 
content among  the  common  people,  such  that  they  longed 
for  a  chano-e  of  condition.  This  loniring  for  change,  this 
intense  desire  of  the  people  for  a  better  state  was  like 
the  smouldering  fires  of  a  volcano.  They  wanted  but 
the  occurrence  of  some  circumstance,  some  irritating 
cause  to  make  them  burst  forth  with  destructive 
energ3^ 

The  profligacy  of  the  government  and  financially 
oppressed  condition  of  the  people  is  seen  in  the  fol- 
lowino-  table  of  jjeneral  deficiencies  of  the  revenue  for 
several  years  preceding  the  revolution  : 

Year  Income  Expenditure  Deficit 

17!^4  23(i, 833,000  frs.  2>*3,]  02,000  frs.  4G,32;>  000  frs. 

178(i  4  74, 04  7,  (Ui)  589,184,995  115,137,346 

1787  474,048,239  599,135  795  125,087,556 

1788  472,415,549  627,255  089  154,839,540 

We  do  not  claim  that  want  of  money  was  the  under- 
lying cause  of  the  French  Revolution.  But  the  facts 
detailed  in  Thiers'  Ilistonj  of  the  French  devolution 


MONETAIiY  AFFAIRS.  221 

indicate  most  clearly  that  it  was  the  irritating  cause, 
the  occasion. 

Frederick  Schoberl,  the  translator  and  editor  of  the 
American  edition  of  that  history,  in  his  introductory 
remarks  in  relation  to  the  cause  of  the  revolution,  says  : 
"The  immediately  propelling  cause  was  no  doubt 
financial." 

In  a  commercial  nation,  where  a  large  part  of  the 
people  live  by  buying  and  selling  and  by  wages  for  their 
labor,  there  is  nothinir,  there  can  be  nothins:,  in  which 
their  prosperity  and  happiness  is  so  bound  up  as  in 
money.  Cut  off  the  supply  of  money  and  their  means 
of  livini?  are  aone. 

History  records  no  case  of  revolution  precipitated  by 
the  industrial  or  commercial  classes  of  any  country 
while  money  was  abundant.  Governments  would  act 
Avisely  to  note  the  swift  and  terrible  revenge  of  a  finan- 
€ially-o})pressed  and  tax-ridden  people. 

Much  has  been  said  and  written  about  the  French 
Assiijnats,  which  were  issued  durins;  the  revolution,  at 
the  close  of  the  last  century.  They  armed  the  new 
empire  ^vith  irresistible  power. 

But  there  were  two  causes  which  produced  a  great 
depreciation  of  their  value.  The  first  and  greatest 
cause  of  their  depreciation  was  want  of  confidence  in 
the  stability  of  the  republic  and  the  fear  that  the  titles 
of  the  confiscated  estates  in  which  they  were  redeem- 
able would  fail. 

The  second  cause  was  the  enormous  issues  of  them. 
"They  amounted  to  thousands  of  millions,  more  than 
was  necessary  to  serve  the  business  needs  of  the  peo- 
ple, and,  as  a  matter  of  course,  they  depreciated,  just 
as  gold  did  after  the  great  increase  of  supplies  from 


222  FRANCE : 

the  Australian  and  California  mines.  But  notwith- 
standnig  their  great  depreciation  from  the  causes  stated, 
a  singular  phenomenon  appeared  in  1793,  which  forcibly 
illustrates  the  wretched  reasonins^  of  bullionists,  and  the 
immense  power  of  legislation  on  the  relative  values  of 
money.  The  precious  metals  were  demonetized  and  the 
severest  of  laws  passed  against  the  use  of  them  in  finan- 
cial and  commercial  operations.  The  result  was  a  des- 
truction of  their  uses  as  money  and  a  depreciation  of  the 
demand  for  them.  One  thousand  millions  of  Assiirnats, 
equal  to  about  $200,000,000,  were  funded  and  retired 
from  circulation.  The  republic  had  lately  been  very 
successful  in  war,  and  confidence  in  the  stability  of  the 
government  had  greatly  revived.  These  three  things 
had  the  extraordinary  effect  of  bringing  the  Assignats, 
which  had  been  depreciated  four-fifths  below  gold,  to 
par  with  it,  while  there  were  yet  outstanding  thousands 
of  millions  of  them. 

These  Assignats  were  an  absolute  paper  money,  not 
redeemable  in  coin  at  all.  Holders  might  buy  the  con- 
fiscated estates  of  the  republic  with  them,  and  this  was 
all  the  redeemability  they  had,  and  yet  the  success  of 
the  French  arms  and  legislation  brought  them  to  par 
with  gold. 

The  wisdom  of  the  French  government  in  making  the 
paper  a  legal  tender  in  1848,  and  the  extensive  and 
beneficial  operations  of  the  bank,  the  surmounting  of 
the  difliculties  of  a  drain  of  specie  from  the  country  and 
the  energizing  of  business  and  employment  of  labor  re- 
sulting therefrom,  are  interesting  and  instructive,  as 
will  be  seen  by  reading  the  following  comment  from 
the  London  Times,  of  February,  1849,  upon  those 
transactions : 


MONETARY  AFFAIRS.  223 


'*  As  a  mere  commercial  speculation,  with  the  assets  which  the 
bank  hold  \n  its  hands,  it  might  then  have  stopped  payment,  and 
liquidated  its  affairs  with  every  probability  tJiat  a  very  few  weeks 
would  enable  it  to  clear  off  all  its  liabilities.  But  this  idea  was  not 
for  a  moment  entertained  bv  M.  D'Argout,  and  he  resolved  to  make 
ever}'  ettbtt  to  keep  alive  what  maj-  be  termed  the  circulation  of  the 
life-blood  of  tlie  community.  Tlie  task  was  overwhelming.  Money 
was  to  be  found  to  meet,  not  only  the  demands  of  the  bank,  but  the 
necessities,  botli  public  and  private,  of  every  rank  in  society.  It  was 
essential  to  enable  tlie  manufacturers  to  work,  lest  their  workmen, 
driven  to  desperation,  should  fling  them-elves  amongst  the  most 
violent  enemies  of  public  order.  It  was  essential  to  provide  money 
for  the  food  of  Paris,  for  the  pay  of  the  troops,  and  for  the  daily 
support  of  the  ateliers  natioiiaux.  A  failure  on  any  one  point  would 
have  led  to  a  fresh  convulsion.  But  the  panic  had  been  followed 
with  so  great  a  scarcity  of  the  metallic  currency,  that  a  few  days 
later,  out  of  a  payment  of  20  millions  fallen  due,  only  47,000  francs 
could  be  recovered  in  silver. 

"  In  this  extremity,  when  the  bank  alone  retained  any  available 
sums  of  money,  the  government  came  to  the  rescue,  and,  on  the 
U'glit  of  the  l.")th  of  March,  the  note^  of  the  bank  were  by  a  decree 
made  a  le(/al  tender,  tlie  i>sue  of  these  notes  being  limited  in  all  to 
350  millious,  but  the  amount  of  the  lowest  of  them  reduced  for  the 
public  convenience  to  100  francs.  One  of  the  great  difficulties  men- 
tioned in  the  leport,  was  to  print  these  100  Iranc  notes  fast  enough 
for  the  public  consumittiou — in  ten  days  the  amount  issued  in  this 
form  had  reached  80  millions.  No  sooner  was  the  bank  relieved  from 
the  necessity  of  paying  away  the  remnant  of  its  coin,  than  it  made 
every  exertion  to  increase  its  metallic  rest.  About  40  millious  of 
silver  were  purchased  abroad  at  a  high  ))rice.  More  than  100  mil- 
lions were  made  over  in  dollars  to  the  treasury  and  the  executive  de- 
partments in  Paris.  In  all,  taking  into  account  the  branch  banks, 
506  millions  of  flve-franc  pieces  have  been  thrown  by  the  bank  into 
the  country  since  March,  and  her  curreucy  was  thus  supplied  to  all 
the  channels  of  the  social  system. 

"Besides  the  strictly  monetary  operations,  the  bank  of  France 
found  means  to  furnish  a  series  of  loans  to  the  Goveruinent — 50  mil- 
lions on  exchequer  bills  on  tlie  31st  of  March,  30  millions  on  the  5th 
of  May,  and  on  the  3d  of  June  150  millions,  to  be  })aid  up  before  the 
end  of  March,  1849;  of  this  last  sum  only  one-third  has  yet  been  re- 
quired by  the  State.  The  banlc  also  took  a  part  in  the  renewed  loan 
of  250  millions,  and  made  vast  advances  to  the  City  of  Paris,  to  Mar- 
seilles, to  the  department  of  the  Seine,  and  to  the  iiosp  tals,  amount- 
ing in  all  to  260  millions  more.  But  even  this  was  not  all.  To  enable 
the  manufacturing  interests  to  weather  the  storm,  at  a  moment  when 
all  the  sales  were  interrupted,  a  decree  of  the  National  Assembly  had 
directed  warehouses  to  be  opened  for  the  reception  of  all  kinds  of 
goods,  and  provided  that  the  registered  invoice  of  these  goods,  so 
deposited  should  be  made  negotiable  by  endorsement.  The  Bank  of 
Prance  discounted  these  receipts.  In  Havre  alone,  18  millions  were 
thus  advanced  on  Colonial  produce,  and.  in  Paris,  14  millions  on  mer- 
chandise— in  all,  60  millions  were  thus  made  available  for  the  purpo- 
ses of  trade.    Thus,  the  great  institution  had  placed  itself,  as  it 


224  FRANCE  : 

were,  in  direct  contact  with  every  interest  of  the  community,  from 
the  Minister  to  the  Treasury  down  to  the  trader  in  a  distant  port- 
Like  a  huge  hydraulic  inaciiine,  it  employi'd  it-;  colossal  power-*  to 
pump  a  fresh  stream  into  the  exhausted  arteries  of  trade,  to  suataia 
credit,  and  preserve  the  ciiculatiou  from  complete  collapse." 

Hon.  "Wm.  D.  Kelly,  in  an  address,  has  given  the 
history  of  the  remarkable  transactions  of  France  dur- 
ing and  after  the  Franco-Prussian  war,  so  concisely 
and  correctly  and  brought  forward  the  vital  points  of 
the  policy  so  forcibly,  that  we  give  it  in  his  own  words, 
as  follows : 

THE   BASIS   OF   FRKNCH   FINANCE. 

"The  distinoruishing  characteristic  of  the  financial  policy  of  the 
French  iiovernment  is  f'>und  in  tlie  fact  that  it  assumes  the  duty  of 
preventing  alternate  periods  of  iiiflati(jn  and  their  inevitable  conse- 
quent diutrac^ion,  and  that  to  accomplish  tliis  end.  whenever  war 
or  other  exigency  lias  caused  an  issue  of  irredeemable  paper,  it  has 
invested  such  i>sue  with  the  character  of  legal  tender- made  it 
available  for  all  purposes  to  whicli  m  ney could  Reapplied  iuF  ance, 
whether  the  transactions  w-  re  b  tweeu  cit.zeus  or  between  citizens 
and  tlie  government,  or  vii:e  vo-.-ia,  and  h  ts  ta'<en  measures  to  jire- 
vent  tlie  witlidrawal  of  the  paper  until  a  continuous  ba  au^e  of  trade 
had  brought  into  the  c 'uutiy  metallic  muuy  enough  to  supply  tlie 
channels  temporarily  filled  by  the  paper  m  )ney  with  which  the  exi- 
gency had  been  met.  Colbert  taug  .t  the  French  people,  and  Napf>- 
leon  emphasized  tiie  lessons  of  Colbert,  that  it  is  labor  that  supports 
government  and  sociei y,  and  that  to  arre-t  the  employment  of  p  o- 
ductive  industry  is  to  imnov  ri<!i  the  public  treasury  and  produce 
discouteut  and  possible  disorder  amuug  tho  people. 

THE   WAR  AND   ITS   KESt'LTS. 

"The  war  between  France  and  Gornniy  was  declared  July  10.  1870, 
and  was  teruiinated  by  the  treaty  I'l  M.i/  iU,  1871.  In  April,  ls70, 
the  circulation  of  the  B  ink  of  France  w  ;s  §2S^i, 750,000,  and  it  held 
of  specie  and  bu  lion  .$201,550,000  luAugjt  the  government  rei^uired 
it  io  suspend  sp(  cia  payments,  and  by  the  same  decree  made  its 
notes  a  legal  tender.  Tlie  first  statement  published  after  peace  had 
been  restored  sliow.d  a  circula  i..n  oi  bH?,onO,00M,with  8110,000,000 
of  specie.  In  cousideraliou  of  the  su^ii  ii-^ion  of  specie  payments, 
and  tlie  use  of  i;s  note-;  as  leg  d  tctd  r,  lae  bank  lo  uied  the  govern- 
ment $300,000,000,  at  1  per  cei.t.  iuii  rest,  a  ul  agreed  lo  pay  the  tax 
above  referred  to  on  iiS  circulati  ii.  Wlun,  in  August,  1870,  the 
French  armies  had  been  deieateil,  and  on  Lcrnation  had  seized  the 
people  of  Paris,  the  Bank  of  Fra  ce  and  l  e  ether  credit  institutions 
of  the  city  entered  into  co-operatic)n.  and  determined,  as  a  matter 
absolutely  necessary  to  the  maintenance  of  society,  to  advance  to 
the  people  within  a  fortnight  180,000,01)0  francs  (.So(j,000  000),  and  it 
Is  a  matter  of  history  that  not  a  single  failure  of  moment  look  place 
in  France  pending  the  use  and  liquidation  of  these  loans.        *        * 


MONETARY   AJjTAIKS.  225 

"These  loans  were  made  to  merchants,  mannfactnrers,  shop- 
keepers, artisans  and  mechanics ;  to  any  citizens  indeed,  whose 
books  showed  that  their  business  during  a  sutliciently  long  period 
had  been  fairly  prosperous,  and  whose  industry  and  integrity  were 
established,  and  of  course  much  importance  was  attached  to  this 
latter  fact.  Many  of  the  advances  to  artisans  and  mechanics  were 
made  wiihout  indorsement  or  collateral  at  all,  or  on  other  security 
indeed  than  a  fair  business  and  an  lioiu;st  name.  The  effects  of  this 
extraordinary  operation  were  of  commensurate  public  importance, 
lathe  midst  of  the  most  frightful  and  accumulated  miiiUiry  and 
poliiical  calamities  in  the  gradual  environment  of  tlie  Frencli  capital 
by  the  German  hosts,  the  ti'ade  and  labor  of  lYance  were  preserved 
and  even  stimulated;  and  it  was  altogether  owing  to  this  patriotic 
anil  most  sagacious  audacity  that,  in  a  period  of  special  and  terrible 
trial,  no  noteworthy  commercial  or  industrial  failure  occurred,  and 
that  France  was  afterward  enabled  to  provide  for  the  payment,  with- 
out serious  difficulty,  of  an  indemnity  intended  permanently  to  crush 
her,  and  wliich  excited  by  its  magnitude  the  astonishment  of  the 
wluile  world. 

"The  decree  of  legal  tender  (course  force)  fixed  the  maximum  of 
the  issue  of  the  bank  at  $480,000,000.  It  was,  however,  increased 
by  the  law  of  December  21),  1871,  to  $560,000,000,  ami  finally,  by  the 
law  of  July,  15,  1872,  to  $040,000,000.  What  effect  had  the  issue  of 
this  vast  amount  of  paper  money  on  the  premium  in  gold?       *         * 

"  In  November,  1871,  when  a  large  payment  on  account  of  the  war 
fine,  which,  as  you  know,  amounted,  with  interest  and  charges,  to 
•$1  100,000,000,  in  addition  to  the  surrender  of  the  magnificent  pro- 
vinces of  Alsace  and  Lorraine  and  their  wealthy  and  industrious 
peoi)le  to  Germany,  was  due,  the  premium  on  gold  rose  to  its  high- 
est point,  2,'2  per  cent.,  at  which,  to  the  French  people,  exorbitant 
rate  it  remained  for  but  a  few  days  ,  and  when  the  irredeemable  cir- 
culation had  been  increased  from  $4G0,000,000  to  $4'JO,OliO,000,  the 
premium  fell  to  1  per  cent.,  and  in  October,  187:5,  when  the  volume 
of  notes  had  actually  reached  $014,000,000,  the  premium  was  merely 
nominal,  and  was  only  demanded  on  large  sums.  Legal  tender,  gold, 
silver  and  paper  money  were  then  circulating  in  common  and  at  par 
with  each  other.  As  I  have  said,  the  war  fine  amounted  to  $1,100,- 
000,000.  The  total  cost  of  the  war  to  France  has  been  officially  esti- 
mated at  $2,000,000,000,  and  the  direct  loss  to  agriculture  at  $800,- 
000,000;  yet  the  last  i)ayment  on  account  of  the  war  fine  was  made 
on  the  5th  of  September,  1873,  or  in  two  years  and  four  months  after 
the  conclusion  of  the  treaty  of  peace.  *  ♦  *  The  advance  of  the 
banks  to  the  manufacturers  in  August,  1870,  enabled  them  to  main- 
tain their  indusiries  and  by  paying  living  wages  to  place  the  whole 
people  in  a  position  to,  not  only  respond  to  the  demands  of  the  gov- 
ernment for  taxes,  but  to  meet  its  call  for  two  loans,  one  for  $550,- 
000,0(10  and  the  other  for  $827,000,000;  the  tenders  in  response  to  the 
latter  call  amounted  to  the  fabulous  sum  of  $8,000,000,000,  or  four 
times  the  amount  of  the  national  debt  of  the  United  States.      *         * 

THK   TRANSFER   OF   BULLION. 

"  The  highest  estimate  I  have  seen  anywhere  of  the  loss  of  the 
precious  metals  by  France  in  the  payment  of  the  fine  is  $240,000,000. 


226 


GERMANY : 


*  *  *         The  French  government  shipped  $100,000,000  of 

specie  and  bullion  directly  to  the  German  governiiient.  Yet  the  tables 
of  the  iwo  countries  (and  they  are  confirmed  by  the  Britisli  tables  of 
exports  and  imports  of  specie)  show  that  France  lost  from  her  inter- 
course with  Germany,  from  January  1,  1871,  to  December  31,  1874, 
but  .SUO,OUO,000  in  gold  and  silver. 

"This  is  the  statement  of  M.  Leon  Say,  made  during  the  time  he 
■was  Finance  Minister,  whicli  he  continued  to  be  till  MacMahon 
changed  iiis  Cabinet.  *  *  *  Between  January  1.  1871,  and 
December  31,  1874,  the  dates  just  referred  to,  she  sent  $110,000,000 
more  of  gold  and  silver  to  Germany  than  she  drew  from  her.  As- 
suming, whicli  there  is  no  good  reason  for  doinir,  that  all  this  went 
on  French  account,  and  it  appears  tiiat  Germany  rereived  but  $250  - 
000,000  of  cash  from  France  in  payments  thereof.  The  truth  is  that 
FraiKie  bein:^-,  for  the  reasons  stated  in  my  introductory  remarks,  the 
creditor  of  all  commercial  nations,  paid  Germany  in  bills  drawn 
against  foreign  debtois  by  the  French  people,  or,  in  other  words, 
Germany  was  paid  in  foreign  merchandise,  ihe  imports  of  which  in 
excess  of  exports  from  January  1,  1S70,  to  December  31,  ls74,  hav- 
ing been,  according  to  the  Bavarian  Vaterlaiid,  $1,132,000,0  0.  Many 
of  the  earliest  of  those  bills  were  drawn  against  German  merchants 
and  bankers,  and  served  to  transfer  money  which  had  licen  in  circu- 
lation in  Germany  to  the  Imperial  Treasurj-^,  and  thus  withdraw  it 
from  commercial  use.  Thus  the  industrial  and  financial  sagacity  of 
the  French  government  enabled  France  to  revenge  herself  upon 
Germany  ))y  the  methods  with  which  it  settled  the  unconscionable 
war  fine  imposed  upon  her.  " 

The  secret  of  this  grand  success  of  France  is  not  a 
secret,  in  fact,  to  any  but  those  who  having  eyes  see 
not,  and  ears  hear  not.  It  was  simply  the  furnishing 
of  the  people  with  the  means  of  successfully  apply- 
ing their  powers  in  the  industries  and  commerce.  It 
was  money.  This  set  that  powerful  people  to  work. 
Every  brain  and  muscle  brought  forth  wealth,  and  the 
commerce  of  France,  thus  produced,  paid  Prussia 
$1,100,000,000  without  impoverishing  France. 

GERMANY. 

Germany  achieved  the  grandest  military  success  of 
the  age,  in  her  war  of  1870-71  with  France.  At  its 
conclusion  she  levied  the  most  gigantic  fine  on  her  con- 
quered  foe  of  which  history  makes  mention,  $1,100,- 
000,000  !  Germany  was  thus  made  rich,  she  thought. 
Her  financial  policy  prior  to  that  time  had  been  consid- 


MONETARY   AFFAIRS.  227 

ered  \<^ise.  Her  money  had  consisted  of  silver  and 
paper.  But,  feeling  proud  from  her  successes,  she 
changed  her  financial  system  to  comport  with,  what  she 
deemed,  her  newly  acquired  wealth.  She  demonetized 
silver  and  prohibited  the  issuance  of  small  bank  notes. 
This  greatly  depressed  business  and  dried  up  the  foun- 
tains of  commercial  prosperity.  Her  expectations  based 
on  the  French  fine  added  to  these  depressing  measures, 
a  spirit  of  extravagance.  The  result  was  that  but  little 
over  one-fifth  of  the  French  fine  was  received  bv  Prus- 
sia  in  money.  The  balance  was  paid  jn  bills  of  exchange 
on  her  own  people  and  in  merchandise.  And  now, 
while  Prussia  did  actually  have  added  to  her  coffers 
over  two  hundred  millions  in  cash  and  eiirht  hundred 
millions  in  merchandise,  she,  is,  to-day,  suffering  from 
a  great  stringency  of  money  and  depression  of  business. 
She  is  in  immeasurably  worse  circumstances  than  her 
conquered  foe.  Why?  Because  her  unwise  legislation 
deprived  her  people  of  money  and  depressed  business, 
thus  bringing  much  greater  loss  than  the  gain  of  the 
thousand  millions  French  fine 

The  wealth  of  a  nation  is  its  industries  ;  the  produc- 
tive labor  of  its  people  ;  its  commerce.  Money  is  the 
life  of  these.  Cut  off  the  supply  of  money  and  these 
languish.  A  thousand  millions  is  no  compensation  to 
a  people  for  the  depression  of  business. 


CHAPTER  XVI. 


OUTLINE    OF    ENGLISH    HISTORY  ! 
FINANCIAL,  COJUVIERCIAL    AND    DOMESTIC. 


1793  to  1829. 

The  precipitation  of  England  into  war  with  France 
in  1793  created  apprehensions,  causing  money  to  seek 
its  hiding  phices,  resulting  in  commercial  embarrass- 
ments. 

The  government  ordered  the  issuance  of  £5,000,000 
of  exchequer  bills  to  restore  confidence.  The  rip- 
ples of  financial  disturbance  disappeared,  and  the 
surface  of  the  commercial  tide  became  smooth  and 
serene.  In  the  spring  of  this  year,  1793,  France  had 
called  out  300,000  men  for  the  army,  and  declared  war 
against  all  Europe.  This  caused  a  general  resort  to 
arms,  and  the  invasion  of  French  territory.  Then 
France  sprang  to  combat  as  a  giant  and  the  continent 
fairly  trembled  under  the  tread  of  her  armies.  She 
levied  a  new  army  of  1,200,000  men,  and  thenceforth, 
for  several  years,  the  tide  of  success  was  for  France. 

This  in  turn,  necessitated  greater  preparation  for 
war  on  the  part  of  England  and  the  other  allies. 

In  the  beginning  of  1795,  the  anti-war  paWy  in  Eug- 


FINANCIAL,  COMMERCIAL    AND    DOMESTIC.  229 

land  was  losing  power,  and  a  steady  growth  of  feeling 
in  favor  of  the  war  became  visible,  but  the  success  of 
the  French  arms  again  raised  the  power  and  influence 
of  the  opposition  at  the  close  of  1795,  and  beginning 
of  1796.  The  heavy  and  increasing  weight  of  taxation 
and  apparent  inability  of  the  allies  to  successfully  resist 
Bonaparte  made  the  opposition  violent.  Added  to  these 
causes  of  discontent  were  the  high  prices  of  provisions, 
resulting  from  scarcity,  and  a  considerable  contraction 
of  the  currency.  Stringency  in  money  was  sensibly 
felt.  These  depressing  conditions  resulted  in  outbreaks 
and  an  attack  on  the  kin<x,  but  without  serious  results. 
During  this  year,  Ireland,  ever  oppressed  and  ever 
anxious  to  throw  off  the  yoke  of  British  government, 
was  in  an  alarniins:  state.  Secret  arrangements  were 
made  with  the  French  for  an  orijanized  revolt.  The 
conspiracy  was  wide-spread.  An  organization  of  500,- 
000  Irishmen  was  ready  to  join  Hocke,  who  prepared 
to  set  sail  with  a  fleet  and  army  across  the  channel. 
The  winds  and  waves  cri{)pled  the  fleet  and  it  Avas  com- 
pelled to  return  to  port,  saving  England  from  a  great 
Irish  rebellion. 

At  the  beginning  of  1797,  the  public  affairs  of  Great 
Britain  Avere  in  a  deplorable  condition.  The  rejection 
by  France  of  overtures  for  peace,  the  violence  of  party 
spirit,  increasing  embarrassment  in  commercial  circles, 
continued  pressure  on  the  bank  of  England,  and  insur- 
rection, discontent  and  suffering  in  Ireland,  added  to 
the  reverses  of  the  allied  armies,  increased  taxation 
and  augmentation  of  the  public  debt,  spread  a  gloom. 
over  the  whole  country  and  threatened  a  destruction 
of  public  credit.  The  three  per  cent,  bonds  fell  from 
99  at  the  beginning  of  the  war  to   51,  and  petitions 


230  OUTLINE    OF   ENGLISH    HISTORY  : 

from  all  quarters  were  presented,  asking  for  a  change 
of  ministers  and  government.  Among  these  disasters, 
one  of  tJie  most  serious  was  the  threatened  suspension  or 
breaking  of  the  Bank  of  England.  For  two  3'ears  the 
bank  had  felt  a  growing  pressure  for  money,  owing  to 
the  demand  for  specie  to  meet  government  loans  to  the 
allies  and  to  supply  the  army  on  the  continent.  In 
the  latter  part  of  1796  matters  were  brought  to  a  crisis 
by  "  runs  "  upon  the  country  banks,  which  arose  from 
dread  of  invasion,  and  the  desire  of  everyone  to  con- 
vert his  paper  into  coin.  These  banks  having  no  other 
source  of  relief,  applied  to  the  Bank  of  England.  The 
panic  soon  reached  London,  became  general,  and  such 
was  the  run  upon  that  bank  that  it  was  on  the  very 
verge  of  insolvency  ;  when  an  order  of  government  in 
council  was  issued,  for  their  relief,  suspending  all  cash 
payments  until  Parliament  could  devise  some  means  of 
preserving  the  public  and  commercial  credit  of  the 
country. 

On  the  assembling  of  Parliament,  early  in  1797,  the 
order  of  council  was  framed  into  a  law.  Cash  pay- 
ments were  suspended,  and  Bank  of  England  notes 
made  legal  tender.  The  bill  was  limited  in  it^  opera- 
tions to  June  24th,  1797,  but  afterward  was  renewed 
from  time  to  time,  and  in  November  was  continued 
until  six  months  after  general  peace  should  be  restored. 
This  wise  act  at  once  stopped  the  run  on  the  banks, 
prevented  a  universal  crash,  restored  confidence,  busi- 
ness and  internal  prosperity. 

Amid  the  dark  surroundings  of  this  crisis,  an  occur- 
rence took  place  which  threatened  the  very  existence  of 
the  British  empire.  It  was  a  great  mutiny  of  the  fleet. 
The  causes  of  the  mutiny  were  published  by  the  sailors 


FINANCIAL,  COMMERCIAL    AND    DOIVIESTIC.  231 

in  a  petition  to  the  government.  They  claimed  that 
wages  and  rations  were  insufficient.  Concessions  were 
made  by  government  to  the  sailors  and  the  mutiny 
ended. 

The  cause  of  this  crisis  was  neither  inflation  of  the 
paper  money  nor  credit,  because,  in  179(),  the  country 
bank  issues  had  been  lessened  about  £4,000,000,  and 
in  1797  the  Bank  of  England  issues  were  £7,000,000 
less  than  in  the  preceding  year.  The  amount  of  com- 
mercial paper  discounted  at  the  Bank  of  England  in 
1797  was  only  £1,800,000  more  thail  in  1796,  and  was 
less  by  £500,000  than  in  1798,  a  year  of  prosperity. 
The  drain  of  coin  from  the  countrv,  necessitatino;  a  con- 
traction  of  the  currency,  caused  the  crisis.  Immedi- 
ately following  the  act  suspending  specie  payments  and 
making  bank  notes  a  lejjal  tender.  Bank  of  Enijland 
issues  increased  from  £9,674,000  in  1797  to  £13,095,- 
830  in  1798.  Business  revived  and  prosperity  returned 
in  a  corresponding  degree. 

Such  was  the  commencement  of  the  paper  system  of 
Oreat  Britain  which  enabled  her  to  unite  the  allies 
against  France,  to  ultimately  overthrow  Bonaparte,  to 
maintain  armaments  of  great  magnitude,  and  to  devel- 
ope  wealth  and  commerce  during  the  war  period  in  a 
wonderful  degree. 

On  the  27th  of  March,  1802,  the  treaty  of  Amiens 
was  made  between  England  and  France,  closing  a  nine 
years'  war.  From  1797  to  the  close  of  the  war  in 
1802,  the  British  Empire  had  been  steadily  increasing  in 
wealth  and  prosperity.  Notwithstanding  the  increase 
of  her  debt  to  £484,465,000,  a  larger  increase  of  taxa- 
tion and  the  famine  of  1799,  her  internal  and  foreign 
commerce  had   greatly  increased,   her   merchant   and 


232  OUTLINE    OF   ENGLISH  HISTOKY  : 

war  marines  had  improved,  her  army  was  strengthened, 
her  wealth  had  grown,  her  credit  was  first-class,  prices 
of  all  property  and  labor  had  advanced,  none  were 
idle,  peace  and  order  jd  re  vailed  everywhere,  and  pros- 
perity blessed  the  land.  Following  is  a  table  showing 
the  amount  of  Bank  of  Ens^land  note  circulation,  com- 
mercial  paper  discounted  at  the  Bank  of  England,  and 
exports  and  imports  from  1795  to  1802,  official  value: 


Bank  of 

Tear. 

England  Notes. 

Discount. 

Exports. 

Imports. 

1795. 

...  £14,017,510.... 

£2,946,000 

£27,123,338... 

.  £23  736,889 

1796. 

. ..      16,729,520 

3,i05,000 

30,518,913... 

.      23,187,319 

1797. 

9,674,000  •... 

5,350,000.... 

28,917,000.... 

.     21,013,0!IO 

1798. 

...     13  095  000.... 

5  870  000 .... 

27,317,0 'O... 

.     25,122  000 

1799. 

...     13,389,000.... 

5,403,0  0.... 

29,556,637... 

.     24,066,000 

1800. 

...     16,854,800.... 

6.401  000 

33,381  000... 

.     28,257,000 

1801. 

...      16,213,000.... 

7  90.5,000 

34,838,000.... 

.     30,435  000 

1802. 

...      15,186,880 

7,523  300 

37,873,320... 

.     28,308,373 

A2:riculture  advanced  even  in  a  areater  desrree  than 
commerce  ;  contrary  to  all  precedent,  the  country  had 
eminently  prospered  during  the  long  and  arduous 
struggle,  and  the  disaffection  and  divisions  which  ap- 
peared during  the  early  part  of  the  war  disappeared. 
From  the  close  of  the  war  in  1802  to  the  renewal  of 
hostilities  in  1803,  an  era  of  prosperity  reigned  in  Eng- 
land. The  revenue  increased  £2,000,000  without  any 
increase  of  taxation.  Internal  as  well  as  external 
peace  blessed  the  country.  An  extensive  paper  cur- 
rency maintained  the  prices  and  activity  of  war  times, 
and  the  opening  of  the  ports  of  Europe  made  the  Eng- 
lish seacoast  cities  the  emporiums  of  the  world. 

The  peace  of  Europe  was  again  destroyed  by  declar- 
ation of  war  in  1803.  Notwithstanding  the  vast  ex- 
penditures and  increase  of  the  debt  of  Great  Britain 
from  1803  to  1809  to  meet  the  emergency  of  war,  there 
was  no  stringency  in  money  matters.      The   country 


FINANCIAL,  COMMERCIAL   AND    DOMESTIC.  233 

was  blessed  with  internal  peace  and  prosperity.  In 
the  years  1810  and  1811  the  harvests  were  very  poor, 
insufficient,  causing  the  exportation  of  £4,271,000  in 
specie  to  pay  for  grain.  There  was  much  distress  in 
the  manufacturing  districts.  To  add  to  the  trouble  of 
the  times,  a  strong  opposition  to  the  war  was  aroused, 
headed  hy  Sir  Francis  Burdett.  The  government  caused 
him  to  be  arrested  and  lodged  in  the  Tower.  This  added 
much  to  the  discontent.  During  this  time  a  stringency 
and  threatened  panic  in  the  money  market  occurred. 
This  has  been  attributed  to  the  Milan  and  Berlin  de- 
crees of  Bonaparte,  the  destruction  of  a  large  English 
merchant's  fleet  in  the  Baltic,  and  to  the  American 
Non-hitercourse  Act.  These  produced  a  sensible  effect 
upon  English  business,  but  alone  did  not  create  the 
general  financial  distress  that  prevailed.  The  real  cause 
for  this  is  found  in  the  fact  that  the  shipments  of  gold 
abroad  to  buy  bread  so  reduced  the  reserves  of  the 
banks,  that  the  country  banks  greatly  reduced  their  is- 
sues, thus  reducing  the  volume  of  money,  and  at  the 
same  time  there  was  an  immense  cuttino-  off  of  credit. 
The  discounts  of  paper  at  the  Bank  of  England  fell 
from  £23,000,000  in  1810  to  £15,000,000  in  1811. 
While  this  shipment  of  coin  abroad  was  going  on,  the 
supply  was  sensibly  diminishing  on  account  of  the  wars 
in  the  mining  country  of  South  America.  Besides 
this,  there  had  been  a  constant  increase  of  population 
and  business  in  England. 

In  1811  the  combination  of  circumstances  pointed  to 
a  want  of  more  paper  money,  at  the  time  when  it  and 
credit  were  being  reduced.  Parliament  was  wise  enough 
to  see  the  cause  of  the  distress  and  applied  the  right 
remedy.      Provision   was   made   for  the   issuance  of 


234 


OUTLINE    OF    ENGLISH    HISTORY: 


£6,000,000  exchequer  bills  to  the  commercial  classes, 
at  nine  and  twelve  months.  This  act  restored  confi- 
dence and  credit  and  prevented  a  crisis.  During  the 
depression  of  1811,  prices  fell  greatly,  and  there  was 
a  considerable  decrease  in  wages  and  demand  for  labor, 
causinjj  much  distress  amouiz;  the  working  class  in  the 
manufacturing  districts.  Amid  this  state  of  affairs,  a 
widespread  conspiracy  was  formed  among  laboring  men 
for  the  destruction  of  improved  machinery,  they  be- 
lievinff  it  to  be  the  cause  of  the  fall  in  wages  and  their 
inability  to  oljtain  employment.  This  consj^iracy  was 
suppressed  by  the  execution  of  a  few  of  the  ring- 
leaders. 

From  1811  up  to  the  close  of  the  Avar  in  1815,  Eng- 
land constantly  increased  in  population,  in  commerce 
and  in  wealth.  The  internal  affairs  were  prosperous 
and  peaceful.  At  the  close  of  the  war,  there  was  uni- 
versal joy  and  high  hopes  of  a  great  increase  of  all 
business.  The  transition  from  war  to  peace  in  1815 
transferred  100,000  soldiers  from  the  battle-field  to 
business  pursuits.  In  1815,  the  export  merchants 
greatly  increased  their  exports,  insomuch  that  for  that 
year  the  amount  reached  £44,053,455,  being  £8,000,- 
000  more  than  for  1814.  The  fall  of  prices  all  over 
Europe,  as  well  as  in  England,  after  the  war  closed, 
caused  the  exporters  immense  losses  on  these  goods. 

Simultaneously  with  this  condition  of  things — in  fact, 
preceding  it — the  banks  began  a  rapid  retirement  of 
their  notes,  in  preparation  for  the  evil  day  of  resump- 
tion, which  was  to  take  place  six  months  after  the  close 
of  the  war.  The  contraction  of  the  currency  was  from 
£46,272,000  in  the  early  part  of  1815  to  £42,000,000 
in  1816,  being  a  reduction  of  £4,272,000  within  a  few 


FINANCIAL,  COMMERCIAL    AND    DOMESTIC  23v' 

months.  This  together  with  the  apprehensions  of  the 
results  of  resumption  greatly  reduced  credit.  The  dis- 
counts of  commercial  paper  at  the  Bank  of  England  fell 
from  £20,(500,000  in  1815  to  £11,182,000  in  181C. 
During  this  rapid  contraction  of  currency  and  credit 
and  consequent  paralj^sis  of  lousiness,  a  failure  of  the 
grain  crop  sent  the  prices  of  food  up  high  in  the  latter 
part  of  181 G,  necessitating  the  payment  of  high  prices 
for  living  out  of  low  wages  and  small  profits,  thus  add- 
injj  ruinous  living  rates  to  insufficient  remuneration  of 
industry.  The  result  of  this  combination  of  circum- 
stances was  distress  and  saffering;  severe  and  wide- 
spread.  Merchants,  shippers  and  manufacturers  were 
in  failinj;  circumstances.  The  as-riculturalists  were  in 
like  distress.  The  laborin«:  classes  were  on  little  more 
than  half  wages  or  in  idleness,  and  many  in  want. 

As  usual,  in  times  of  general  depression,  so  in  this 
case,  the  suffering  and  those  thrown  out  of  employment, 
joined  by  hosts  of  wretched  vagabonds  assembled  in 
crowds,  held  meetiuirs  and  announced  an  ultimatum. 
They,  contrary  to  facts,  held  that  the  reckless  prodig- 
ality of  government  sust'iiiicd  by  a  fictitious  paper 
credit  were  the  sources  of  all  their  distresses  ;  that  it 
was  this  which  made  provisions  high,  wages  low,  and 
want  of  employment  universal.  They  demanded  a  sud- 
den reduction  of  pu])lic  expenditures,  and  a  return  to 
metallic  currency.  These  meetings  resulted  in  serious 
riots,  in  which  several  lives  were  lost. 

The  general  suffering  and  discontent  manifested  itself 
in  a  vast  plan  of  insurrection,  having  its  head  in  Lon- 
don and  ramifying  through  all  the  manufacturing  and 
mining  districts,  having  for  its  object  the  overthrow  of 
the  monarchy  and   the    establishment    of  a  republic. 


236  OUTLINE    OF   ENGLISH   HISTORY: 

Great  meetings  were  held  by  the  discontented,  under 
the  direction  of  leaders.  The  Prince  Regent  was  openly 
attacked.  Open  insurrection  broke  out  in  Derby,  and 
it  was  only  by  the  most  vigorous  and  severe  measures 
that  the  contemplated  general  uprising  was  prevented. 
The  opening  up  of  the  grain  trade  from  the  Baltic,  in 
the  end  of  1816  and  in  1817,  suddenly  reduced  the 
price  of  grain  and  rendered  the  condition  of  the  farmers, 
already  depressed,  almost  desperate.  This  made  bread 
cheaper  for  all,  especially  laborers,  but  correspondingly 
reduced  the  farmers  ability  to  buy  manufactured  goods, 
and  thus  lessened  the  demand  for  labor  so  that  the  re- 
duction in  the  price  of  corn  Avas  of  little  benefit  to  the 
laboring  classes  beyond  lessening  the  chances  of  im- 
mediate starvation. 

This  crisis  and  distress,  and  those  riotous  demon- 
strations of  the  laboring  classes,  were  not  caused  by  a 
decline  of  commerce,  because  in  1815  the  exports  ex- 
ceeded those  of  the  previous  year  by  £8,000,000  and 
imports  fell  below  those  of  1814  £600,000,  and  this, 
according  to  the  generally  accepted  theories,  indicated 
commercial  prosperity.  In  1816  the  exports  fell  £8,- 
000,000  below  those  of  the  previous  year  and  the  im- 
ports fell  off  £5,500,000,  but  this  decline  in  commerce 
did  not  precede,  but  followed  the  crisis.  The  exports 
of  each  of  those  years  exceeded  the  imports  several 
millions,  and  were  an  average  of  those  previous  to  1815. 
There  is,  then,  nothing  in  the  foreign  commerce  to  ac- 
count for  the  crisis.  The  losses  of  the  exporters  on 
shipments  of  1815  do  not  account  for  the  depression  of 
the  times,  because, had  this  been  the  only  circumstance 
of  importance,  it  would  have  resulted  simply  in  weaken- 
ing or  breaking  the  exporters,  and  there  stopped.    Other 


FINANCIAL,  COMMERCIAL   AND   DOMESTIC.  237 

men  would  have  taken  their  phices,  and,  beyond  local 
and  isolated  cases  of  loss  occasioned  by  the  failure  of 
those  shippers,  the  community  would  not  have  been 
affected.  The  failure  of  the  grain  crop  in  1816  could 
not  have  produced  the  disastrous  state  of  affairs  just 
related,  because  the  failure  did  not  come  until  after  the 
crisis  came,  and  in  the  last  part  of  1816  and  in  1817,  after 
large  importations  from  the  Baltic  had  set  in,  although 
prices  of  grain  were  reduced  to  half,  yet  the  condition 
of  all  classes  remained  unimproved,  and  the  distress  of 
all  the  aflrriculturalists  was  ago-ravated.  Furthermore, 
by  reference  to  the  history  of  1799,  we  find  that  pros- 
perity existed  when  there  was  almost  a  total  failure  of 
crops  The  clamor  against  public  extravagance  had  no 
foundation,  because  the  revenue  and  expenditures  of 
government  were  considerably  reduced  below  those  of 
previous  years.  The  sudden  transition  from  war  to 
peace  cannot  be  considered  a  cause  of  the  woeful  times 
of  1816,  because  a  cessation  of  war  and  a  return  to 
peaceful  pursuits  is  a  relief  from  the  exhausting  in- 
fluence of  war  and  enables  a  people  to  turn  all  their 
poAvers  to  the  accumulation  of  wealth,  and  if  it  decreases 
the  demands  for  munitions  of  war  it  increases  demands 
for  domestic  consumption.  This  fact  is  illustrated  in 
the  history  of  the  United  States  during  the  first  few 
years  after  the  close  of  the  rebellion.  No  period  in 
their  history  has  been  marked  by  greater  prosperity  and 
accumulation  of  wealth  than  that  from  1865  to  1870. 
It  is  also  proven  by  the  condition  of  France  after  the 
Franco-Prussian  war,  AVhen  peace  was  declared,  she 
bent  all  her  energies  toward  production  and  connnerce, 
and  the  ffiijantic  results  have  astonished  the  world. 
England  owed  no  debt  abroad  that  drained  her  cof- 


238  OUTLIXE    OF   ENGLISH   HISTORY  : 

fers.  She  was  at  peace  with  all  nations.  There 
was  nothing  in  either  her  internal  or  external  con- 
dition or  relations  which,  prior  to  the  money  crisis,  in- 
dicated the  approach  of  such  a  catastrophe.  There  is 
but  one  other  source  we  can  turn  to  for  a  cause  :  that 
is  the  finances.  The  war  which  had  just  closed  had 
kept  the  country  well  drained  of  specie  to  maintain  the 
English  army  on  the  continent.  The  supply  of  gold 
and  silver  from  the  South  American  mines  had  fallen, 
from  £10,000,000  in  1809  to  £2,500,000,  on  account 
of  the  revolution  there,  so  that  Ensfland  had  no  ade- 
quate  supply  of  coin  to  carry  on  her  business.  Simul- 
taneouslj'  with  this  reduction  of  the  coin  and  the  other 
depressing  circumstances  related,  the  banks,  instead  of 
enlarging  their  paper  circulation  to  hold  up  and 
strengthen  the  arms  of  industry  and  spread  the  sails 
of  commerce,  were  compelled,  by  the  law,  on  the  close 
of  the  war  to  begin  a  vigorous  retirement  of  notes  in 
order  to  be  prepared  for  resumption.  Thus  the  paper 
currency  was  reduced  four  or  five  million  pounds  within 
a  short  time,  followed  by  a  panic,  and  consequently 
credit  Avas  rapidly  reduced  and  all  business  paralized. 
Besides  this,  a  large  amount  of  exchequer  bills  was 
retired  by  the  government  in  1816,  thus  still  further 
reducing  the  volume  of  money.  Another  fact  tendinsr 
to  accelerate  the  approaching  ruin  was  the  general  ap- 
prehensions and  forebodings  felt  in  view  of  the  coming 
day  of  resumption.  Furthermore,  at  the  close  of  the 
war  all  the  powers  of  Europe  pursued  the  same  unwise 
policy  of  funding  their  unfunded  and  floating  debts, 
reducing  the  paper  money  and  returning  to  specie  pay- 
ments, thus  reducing  the  aggregate  volume  of  money 
and  causing  a  universal  fall  in  prices  over  Europe. 


FINANCIAL,  COMMERCIAL   AND   DOMESTIC.  239 

In  this,  then,  rests  the  cause  of  the  crisis  and  labor 
riots  of  181(5 — rapid  contraction  of  the  currency;  and 
this  resulted  from  the  approach  to  specie  resumi)tion 
required  by  law.  In  the  parliamentary  debates  on  the 
distress  of  181G,  Lord  Liverpool,  Lord  Castlereah,  and 
Mr.  Vansittart  mentioned  that  "co-incident  with  the 
fall  in  prices  of  corn,  has  been  a  great  reduction  in 
the  amount  of  the  circulating  medium.  Beyond  all 
question,  this  is  the  principle  cause  of  the  distress  which 
now  generally  prevails."  Even  the  bullionists,  headed 
by  Messrs.  Horner,  Ponsonby,  and  Tierney,  in  moving 
for  resumption  of  cash  payments,  were  compelled  to 
admit  that  "a  greater  and  more  sudden  contraction 
has  never  taken  place  in  any  country  than  in  this,  since 
the  peace,  with  the  exception,  perhaps,  of  France  after 
the  failure  of  the  Mississippi  scheme.  This  sudden 
contraction  has  been  the  cause  of  all  our  distresses  ;  it 
is,  and  will  long  continue  to  be,  the  cause  of  all  our 
difficulties."  The  last  clause  was  prophetic,  and  yet 
their  faith  in  a  metallic  currency  and  specie  basis  of 
prices  was  so  blind  that  they  relentlessly  moved  for 
resumption,  although  they  knew  the  suffering  it  would 
entail  upon  the  people. 

Sir  A.  Alison  said  of  1816  :  "  The  sudden  contrac- 
tion of  the  currency,  from  the  prospect  of  a  speedy  re- 
sumption of  cash  payments,  then  involved  one-half  of 
the  farmers  and  traders  of  the  United  Kingdom  in 
bankruptcy." 

This  condition  of  affairs  continued  through  the  first 
half  of  1817. 

The  Remedy. — Parliament,  after  long  debating, 
deferred  a  resumption  of  cash  payments,  and  issued 
£7,500,000  exchequer  bills.     The   banks   were  there- 


240  OUTLINE   OF   ENGLISH   HISTORY: 

by  enabled  to  reissue  their  notes  with  safety,  and  the 
volume  of  currency  rapidly  grew  in  the  latter  part  of 
1817  and  1818,  so  that  in  the  latter  year  it  had  in- 
creased £5,000,000,  this  with  the  exchequer  bills  mak- 
ins:  a  total  increase  of  circulatini]^  medium  of  £12,500,- 
000.  Symptoms  of  improvement  appeared  in  the 
enlarged  issues  of  country  banks  in  the  latter  part  of 
1817.  An  advance  of  prices  and  a  restoration  of  peace 
and  prosi^erity  followed  all  through  1818  and  in  the 
first  part  of  1819. 

1819,  1820,  1821,  1822,  and  first  part  of  1823. 
— In  1818  Parliament  thought  it  expedient  to  still 
further  defer  a  resumption  of  specie  payments,  until 
July  5th,  1819,  which  was  accordingly  done.  At  the 
opening  of  Parliament  in  January,  1819,  affairs  were 
in  a  prosperous  condition  ;  so  much  so  that  the  Prince 
Regent  said  in  his  speech:  "There  is  a  considerable 
and  progressive  improvement  of  the  revenue  in  its  most 
important  branches,  and  trade,  commerce,  and  manu- 
factures of  the  country  are  in  a  most  flourishing  condi- 
tion." Parliament  rejoiced  at  the  auspicious  circum- 
stances under  which  they  met.  The  country  being  thus 
blessed  with  internal  peace  and  prosperity,  and  there 
being  nothing  to  mar  the  present  happiness  or  cii-ite 
apprehensions  for  the  future.  Parliament,  early  in  Feb- 
ruary, took  up  the  question  of  resumption  of  specie 
payments.  Upon  news  of  this  action  becoming  spread 
abroad,  merchants,  traders,  and  bankers  sent  petitions 
in  praying  for  a  still  further  postponement  of  resump- 
tion, and  warning  members  against  the  dangers  liable 
to  follow  a  return  to  specie  payments.  The  sul)ject 
was  lengthily  discussed,  and  so  universal  was  the  con- 
viction of  members  that  the  time  for  resumption  was 


FINANCIAL,  COJIMERCIAL   AND   DOMESTIC.  241 

auspicious,  that  when  the  resolutions  for  partial  resump- 
tion to  begin  Fcbruar}''  1st,  1820.  and  full  resumption 
to  begin  in  May,  1823,  were  put  upon  their  passage 
there  was  not  one  dissentins:  voice  against  them.  The 
effects  of  this  act  were  terrible  in  the  extreme.  The 
country  banks,  alarmed,  at  once  refused  to  extend 
credits,  and  quickly  reduced  their  circulation  nearly 
£5,000,000  sterling.  The  entire  paper  circulation  was 
reduced  from  £40,278,000  in  1818  to  £40,928,428 
in  1819.  Credit  was  almost  destroyed.  Commercial 
paper,  discounted  at  the  Bank  of  England,  fell  from 
over £20,000,000  in  1815  to  £6,515,000  in  1819.  "The 
current  of  business  was  at  once  congealed,  as  the  flow- 
ing stream  by  an  artic  winter."  Impoi'ts  and  exports 
fell  off  from  ^  to  ^.  Prices  fell  to  half  their  former 
amount.  Distress  was  universal  in  the  latter  months 
of  1819.  Distrust,  the  forerunner  of  all  financial  dis- 
asters, was  in  all  branches  of  industry  and  business. 
The  three  per  cent,  government  bonds  fell  from  79  in 
Janaary  to  65  in  December.  The  bankruptcies  in- 
creased from  86  in  January  to  178  in  May;  and  for 
the  whole  year  were  531  more  than  for  the  preceding 
year. 

The  effects  of  this  panic  spread  disaster  and  distress 
over  the  whole  country,  and  the  discontent  and  suffer- 
ing resulting  were  soon  manifested  in  gigantic  and 
threatening  assembla£i:es  of  the  laborinor  classes.  Mis- 
taking  the  cause  of  their  sufferings,  these  meetings, 

which  became  general  all  over  the  manufacturinE:  dis- 
cs » 

tricts  of  England  and  Scotland,  demanded  universal 
suffrage  and  annual  parliaments.  The  leading  topics 
of  discussion  were  the  depression  of  wages  and  misery 
of  the  poor.     They  organized  and  drilled  in  military 


24:2  OUTLINE    OF   ENGLISH   HISTORY  ; 

exercises.  They  assembled  at  different  points  in  great 
numbers,  sometimes  as  high  as  30,000  or  40,000,  with 
flags,  banners  and  mottoes,  with  such  inscriptions  on 
them  as  these:  "No  Corn  Laws;"  "Annual  Parlia- 
ments;" "Universal  suffrage;"  "Vote  by  Ballot;" 
"  Equal  Eepresentation  or  Death  ;"  "Liberty  or  Death  ;" 
"God  armeth  the  Patriot."  One  of  the  greatest  of 
these  meetings  was  dispersed  by  the  military.  It  soon 
appeared  how  little  effect  the  violent  suppression  of  the 
Manchester  meeting  had  in  preventing  assemblages  of 
a  similar  or  a  still  more  alarming  character  through- 
out the  country.  Meetings  took  place  at  Birmingham, 
Leeds,  Westminster,  York,  Liverpool,  and  Notting- 
ham, attended  by  great  multitudes,  at  which  flags,  rep- 
resenting a  yeoman  cutting  at  a  women,  were  displayed 
with  the  word  ^^ vengeance"  inscribed  in  large  letters, 
and  resolutions  vehemently  condemning  the  Manchester 
proceedings  were  adojited.  Li  order  to  suppress  these 
gatherings  of  suffering  and  desperate  humanity  the 
government  was  compelled  to  open  the  lists  for  volun- 
teers, and  by  adding  11,000  recruits  to  the  home  force 
succeeded  in  suppressing  them  here  and  there  for  a 
time.  But,  while  the  insurgents  were  thus  dispersed 
and  cast  down,  they  were  not  broken.  Finally,  in  Feb- 
ruary, 1820,  one  of  the  most  alarming  and  brutal  con- 
spiracies ever  known  was  formed  for  the  destruction  of 
the  English  ministry,  the  overthrow  of  the  monarchy, 
and  the  establishment  of  a  provisional  government. 
The  plan  was  for  hired  emissaries  to  seek  out  the  min- 
isters at  their  places  of  abode  and  murder  them,  seize 
the  artillery,  take  possession  of  the  government  prop- 
erty and  force  submission  to  the  conspirators.  This 
nefarious  conspiracy  would  have  succeeded,  perhaps,  at 


FINANCIAL,  COMMERCIAL    ATVD    DOMESTIC.  243 

least  ill  part,  had  not  one  of  the  number  secretly  re- 
vealed the  conspiracy  to  the  authorities.  Secret  meas- 
ures were  at  once  taken,  and  the  ringleaders  were 
captured  unawares.  On  the  heels  of  this  came  insur- 
rections and  outbreaks  a\l  over  the  north  of  England 
and  Scotland,  having  for  their  object  the  overthrow  of 
the  government.  These  outbreaks  necessitated  an  in- 
crease of  the  yeoman  soldiery  to  35,000,  besides  the 
reirulars  and  militia.  This  state  of  affairs  continued 
from  the  latter  part  of  1819  to  and  including  the  greater 
part  of  1823.  Riots,  incendiarism,  house  breaking, 
strikes,  insurrection,  conspiracies  to  overthrow  the 
government,  destruction  of  property,  and  universal  dis- 
tress among  the  lal^oring  classes,  and  great  depression 
among  agriculturalists,  merchants,  and  manufacturers, 
rent  and  distracted  the  country  during  the  space  of 
over  three  years. 

Following  is  a  graphic  description  of  the  terrible  re- 
sults of  British  resumption  measures  from  1816  to  1823, 
taken  from  Doubleday's  History  of  England  : 

"Prices  fe^l,  on  a  pudden,  to  a  minons  extent;  banks  broke; 
wn^es  f(  11  with  llie  prices  of  manufactures,  and  before  the  j'ear  181(> 
had  come  to  a  close,  panics,  bankruptcy,  riots  and  disaffection  had 
spread  through  Ihe  land.  Vast  bodies  of  starving  and  discontented 
arti-ans  now  congregated  together  demanding  a  reform  of  the  Par- 
liuiient,  a  repeal  of  the  corn  laws,  and  a  reduction  of  taxation.  The 
discontent"^,  the  government,  as  usual,  put  down  by  an  armed  force, 
•who,  with  th'>  Constitution  in  their  mouth's,  salired  the  people  a  la 
Cdssaque  The  commercial  distress  lli'y  ascribi  d  to  the  traii'^itioii 
from  war  to  peace,  and  contented  themselves  with  the  app'ication 
of  some  palliatives  in  tlie  shape  of  advances  of  money  and  exchequer 
bills  through  the  Bank,  hoping  that  alluirs  would  gradually  come 
round  to  a  settled  state.  In  this  they  were,  after  a  time,  partly 
gratified  The  mercantile  part  of  the  community  accommodated 
themselves  gr.Kluallv,  perforce,  to  thenewscile  of  prices,  afier  a 
transition  which  rendered  bankrupt  no  l(!-3  than  eiirhty-nine  country 
banks,  together  With  an  enormous  number  of  trailers  of  all  grades 
and  descriptions.  In  tlie  mi'lst  of  this  turmoil,  anot'.ier  grand 
cause  of  confusion  remains  to  be  mentioned,  and  this  was  tlie  new 
and  ticklish  position  of  the  Grandam  of  so  many  years  of  villainy 


244  OUTLINE  *0F   ENGLISH   HISTORY  : 


and  egregious  folly,  to-wit,  of  the  'Old  Lady  of  Threadneedle 
btrtiet,'  as  she  now  began  to  be  called  ;  that  is  to  say,  of  the  Bank 
itselt.  The  reader  will  remember  tliat  throughout  the  various  times 
wiieu  the  act  for  coutinuing  Pitt's  'liaulc  Kestiiction'  were  to  be  re- 
newed or  altered,  one  clause  was  always  retained,  that  was  the 
clause  binding  the  Banli  to  resume  cash  payments  wiiMn  a  few 
months  after  peace  sliould  corae.  It  has  been  asserted  that  Pitt 
never  meant  this  clause  to  be  enforced,  at  least  so  far  as  regarded 
the  fund-holder ;  and  that  he  in,  imaled  as  much  in  Par  lament  on  one 
occasion.  This  may  possibly  be  true ;  but  the  clause,  nevertheless,  was 
adlieredto;  so  that,  before  tlie  Waterloo  bonlires  were  well  out,  the 
Bank  directors,  withth.s  clause  staring  them  in  the  face,  began  to 
bethink  themselves  how  they  migiitniostquicklykssen  the  enormous 
bales  of  their  paper  that  were  afloat,  so  as  togi\  e  tliem  .'^omecliauce  of 
paying  the  remainder  in  gold  and  silver  'on  demand.'  Tiiis  was  a  new 
featui'e.  During  the  former  revulsions,  such  as  thai,  in  1810,  caused  by 
the  decrees  of  Bonaparte  against  the  admission  of  British  goods,  the 
Bank  had  come  promptly  lorvvaid  with  loans  and  discounts  to  re- 
lieve the  pressure.  Now,  however,  the  Directors  scarcely  dared  to 
move  an  inch.  They  knew  that  the  'political  economists*  were 
strung  in  the  House,  and  that  they  were  bent  upon  cash  payments  at 
all  risks.  They  knew  that  the  Jews  of  Change  Alley  would  secretly 
abet  the  same  doctrine.  Against  a  combination  oi  usurers  and  the- 
oi'ists,  one  set  all  seltishness,  the  other  all  crochets,  there  was  m» 
defence  to  be  made  The  country  gentlemen,  who  were  the  dupes 
of  the  economists,  were  led  to  believe  that  cash  payments  were 
necessary  for  both  the  interest  and  security  of  th -mselves.  Those 
wlio  iLid  the  power  were  resolved,  and  nothing  was  leit  to  the  Bank 
but  to  narrow  its  issues,  and  look  about  for  gold  and  silver  where- 
with to  meet  the  storm.  Tnis  was  altogether  a  diiHcult  business. 
1\\  X,iHi  ynjit  laUi  sAowii,  thirty-seven  country  banks  had  become  bank- 
rupt. The  commercial  world,  therelore,  required  additional  prop- 
ping. But  the  government  was  in  tue  same  dilemma;  a, id  to  it  Hie 
merchants  were  sacrdiced.  Between  February  and  August,  181G, 
the  l^ireccors  lessened  their  discounts  from  twenty-three  millions  to 
eleven  millions ;  and  before  February,  1817,  to  eiy at  millions;  and  be- 
fore August  of  the  same  year  to  seycra  »/it/^Jons;  w,iilst  up  to  nearly 
tlie  same  period,  they  held  of  exchequer  btUs,  etc.,  twenty-Jive  mil- 
lions!  This  reduciion  of  private  discounts  answered  two  purposes 
of  the  Bank:  it  kept  taeir  circulaiion  within  bv>unds;  and,  if  it 
slaughtered  the  merchants  and  manul.icturers,  it  brought  about  an- 
other novelty,  viz.,  areduction  in  the  price  of  gold  damn  to  four  pounds 
theounce;  or  nearly  to  the  mint  price!  This  euabled  them  to  get  gold 
on  ea.iier  terms,  and  to  make  a  flourish,  by  the  voluntary  issue  of  a 
large  sura  in  sovereigns ;  a  measure  absurd  and  prennture  to  the 
last  degree,  for  by  this  addition  thrown  into  the  currency,  the  prices 
ot  gold  and  silver  bunion  were  again  raised  a  little,  and  the  whole 
of  tliis  new  coin  was  exported! 

"This  reduction  of  the  Bank  issues,  and  destruction  and  crippling 
of  the  country  banks,  had  auotlur  and  still  more  important  effect, 
inasmuch  as  by  causing  the  price  of  gold  to  fall  to  nearly  the  mint 
price,  ii  encouraged  the  political  economists  to  press  forward,  and 
at  last,  in  1811),  to  pass  an  act,   the  most  important   in  its  conse- 


FINANCIAL,  COMMERCIAL   AND    DOMESTIC.  245 

quences,  and  extraordinary  in  its  circumstances,  that  ever  was  de- 
cided upon  by  any  legislature,  in  any  age  ur  cuuntiy.  This  was  the 
celebrated  'Bill  lur  the  Restoration  of  Casli  rayinents,'  passv^d  in 
18ia,  aid  since  lanious  as 'Peel's  Curreuc,  Bill.'     ***** 

"When  the  two  Houses  of  Parli.iiiK.-ut  111  1 1  r  the  session  of  the 
year  16i'2-l>3,  to  the  eyes  of  intelligent  observe  :'s  an  extraordinary 
scene  pre-euted  itself.  Ther^-,  on  one  side,  w  re  t  le  two  Houses, 
constitullug  the  'Imperial  Parliament,'  gaged  aud  pledged,  as  deeply 
and  solemnly  as  ever  mcu  were  pkdgcd  iu  ad  t.e  world,  to  set  the 
curreuey  question 'at  rest  forever,' as  far  as  exiinclim  of  all  Bank 
notes  for  sums  uiuk-r  li\e  pounds,  aud  the  payment  of  the  remainder 
on  demand,  in  sovereigns  coiued  out  of  gold  at  tlie  rate  of  £3  19s. 
10|.2ii.  per  ounce  Troy,  coidd  sot  it  at  rest;  at.d  there,  on  the  other 
side,  were  Mr.  Cobuct  and  his  readers  wimt.n^iv  gridiron  ready  either 
to  repeat  upon  the  person  of  that  extraordiiiary  m.m  the  sail  story  of 
St.  Lawrence,  or  to  be  adopted  as  a  type  aud  token  of  the  trhiinph  of 
his  principles  as  to  this  graud  topic  for  ever  ;iud  ever!  At  this  period, 
however,  Mr.  Cobbett  did  not  stand  so  much  aloue  as  he  did  at  the 
time  ofhis  hazarding  the  prediction,  with  ail  its  penalties  annexed  to 
it.  As  thememoraule  tirst  of  May,  1823  d  ew  near,  the  country  bank- 
ers, as  well  as  the  Bank  of  England,  natuiaily  pri-pared  themselves 
by  a  gradual  narrowing  of  their  circulation,  lor  ihe  (h'ead.d  hour  of 
gold  aud  silver  payments  'on  demand,'  an!  la.'  witluirawal  of  the 
small  notes.  We  have  already  seen  the  fill  in  prices  pro- 
duced by  tins  universal  narrowing  of  the  paper  circulation.  The  ef- 
fects of  the  distress  produced  all  over  the  country,  the  cousequences 
of  this  fall,  we  have  yet  to  see. 

"Tlie  distre-s,  ruin  aud  laauKrnptcy  winch  now  took  place  were 
universal,  affecting  both  tlie  great  interests  of  land  aud  trade;  but 
amongst  the  landlords  whose  e.-tates  were  burthened  by  mortgages, 
jointures,  settlements,  legacies,  etc.,  the  effects  were  most  inarked 
and  out  of  the  ordinary  course.  In  hundreds  of  cases,  from  the  tre- 
menduous  reduction,  in  tne  price  of  land  winch  no  .v  took  place,  the 
estates  barely  sold  for  as  much  as  would  pay  off  tne  mortgages ;  aud 
hence  the  owners  were  stripped  of  all,  and  mado  beggars." 

The  cause  of  this  chaotic  state  of  society  was  not  a 
decline  of  commerce,  because  that  did  not  precede  but 
followed  the  crisis.  In  1818  the  exports  were  £44,- 
564,044,  and  the  imports  £35,84j,;>10,  both  several 
millions  greater  than  they  had  been  since  1815.  For 
1819,  the  year  the  crisis  began,  the  exports  were  £35,- 
643,415,  being  nearly  £9,000,000  less  than  those  of 
the  preceding  year  ;  and  the  imports  were  £29,681,640, 
being  over  £6,000,000  less  than  for  1S18.  This  was 
during  the  crisis.  The  exports  of  1819  were  £6,000,- 
000  greater  than  imports,  showing  a  healthy  balance  in 


246  OUTLINE   OF   ENGLISH   HISTORY: 

favor  of  England.  The  crisis  in  France  and  Belgium 
of  1817  and  1818  was  not  the  cause  of  the  English 
chaos,  because,  at  the  time  when  the  former  were  suf- 
fering most  severely,  England  was  most  prosperous,  as 
appears  from  her  commerce  and  internal  conditions  in 
1818.  There  was  no  scarcity  of  provisions.  Prices  of 
food  were  low,  and  plenty  filled  the  country.  Eng- 
land's foreign  relations  were  all  peaceful.  The  country 
abounded  in  agricultural,  mechanical  and  mineral  pro- 
ducts. Taxes  had  been  considerably  reduced,  and  gov- 
ernment expenditures  brought  down  several  millions. 

There  were  no  changes  in  the  form  of  government ; 
no  radical  transitions  or  changes  in  society  ;  no  great 
questions  of  church  or  state  ;  nothing  in  the  condition 
of  things,  except  the  unwise  legislation  of  Parliament, 
which  could  have  produced  such  a  state  of  affairs  as 
distracted  England  from  1819  to  1823.  The  exporta- 
tion of  gold  in  1818,  one  of  England's  most  prosperous 
years,  to  pay  for  previous  importations  of  grain,  to- 
gether with  the  payment  of  a  small  French  loan,  had 
reduced  the  bullion  in  the  Bank  of  England  from  £11,- 
914,000  in  1817,  to  £6,363,000  in  1818,  and  the  small 
supply  of  bullion  continued  until  1823  ;  but  this  of 
itself  could  not  have  been  the  cause  of  the  disasters, 
else  the  crisis  would  have  taken  place  in  1818.  That 
the  exportation  of  bullion  was  not  alone  the  cause  of 
the  crisis  is  evident  from  the  fact,  that  during  all  the 
prosperous  years,  from  1800  up  to  1809,  the  bullion  in 
the  bank  averaged  fully  as  low  as  it  did  in  1818. 
Want  of  credit  cannot  have  been  the  cause,  because 
discounts  for  1819  were  £1,100,000  greater  than  they 
had  been  in  1818.  But  credit  was  much  below  what 
was  needed. 


FINANCIAL,   COJOIERCIAL    AND    DOMESTIC.  247 

The  real,  the  mo\nng  cause  of  the  crisis,  was  the  act 
of  Parliament,  early  in  1819,  fixing  a  day  for  a  partial 
resumption  of  specie  payments,  to  begin  February, 
1820,  and  full  resumption,  May,  1823.  So  soon  as 
this  act  was  passed,  the  banks  began  a  rapid  contrac- 
tion of  their  issues.  The  contraction  in  1819  was  £8,- 
000,000,  being  one-sixth  of  the  entire  currency,  within 
a  few  months,  and  it  continued  until  sometime  in  1822, 
when  it  fell  to  the  sum  of  £26,586,000,  but  little  over 
half  what  it  had  been  in  1818.  The  effects  of  this 
contraction  of  the  currency  have  been  but  feebly  por- 
trayed. 

The  Remedy. — At  length  the  distress  had  become 
so  great,  and  the  danirers  so  alarmins;,  that  orovem- 
meut  recognized  the  fact  that  some  remedy  must  be 
administered,  or  revolution  might  ensue.  Accordingly, 
in  July,  1822,  Parliament,  driven  to  it  ])y  the  necess- 
ities of  the  times,  passed  an  act  permitting  the  Bank 
of  England  to  issue  £1  notes,  and  making  the  £5  and 
upward  notes  of  that  bank  a  legal  tender.  Authority 
was  also  conferred  for  issuing  £4,000,000  exchequer 
bills  for  the  relief  of  the  agriculturalists.  Thus  it  was, 
after  three  years  of  suffering,  distress,  riots,  strikes 
and  threatened  revolution  on  the  part  of  the  people, 
the  buUionists  in  Parliament  were  compelled  to  reverse 
their  steps,  renew  the  legal  tender  character  of  the 
bank  paper,  and  issue  a  large  sum  of  exchequer  bills  to 
relieve  the  country.  The  result  was  an  expansion  of 
the  currency  £6,000,000,  and  relief  to  the  country. 

The  volume  of  currency  stood  as  follows  :  for  1822, 
£26,588,600:  for  1823,  £28,096,544;  for  1824,  £32,- 
789,152;  and  in  the  beginning  of  1825,  £41,048,298. 

1825. — The  year  1825  opened  auspiciously.     Lord 


248  OUTLINE   OF   ENGLISH   HISTORY: 

Derby  said  in  his  speech,  at  the  opening  of  Parliament  r 
*' Our  present  prosperity  is  a  prosperity  extending  to 
all  orders,  all  professions,  and  all  districts."  The 
jLnnual  Register  said : 

'•Agricultural  distress  had  disappeared;  the  persons  engaged  iit 
the  cotton  and  woolen  manufactures  were  in  full  employment;  the 
various  branches  of  the  iron  trade  were  in  a  state  of  activity;  on 
all  sides  new  buildings  were  in  a  state  of  erection  and  m  ney  was- 
so  abundant  that  new  plans  of  enterprise  found  no  difficulty  in  com- 
manding funds." 

The  Quartei'ly  Review  said  : 

"The  increased  wealth  of  the  middle  classes  is  so  obvious  that  we 
can  neither  walk  the  fields,  visit  the  slopes,  nor  examine  the  woi"k- 
shops  and  storehouses  without  being  deeply  impressed  "vith  the 
change  a  few  years  have  produced." 

This  prosperity  seemed  to  rest  on  a  solid  basis.  The 
three  per  cent,  government  bonds  advanced  to  96  in 
July.  Prices  of  almost  all  commodities  advanced,  as 
did  also  stocks  of  banks  and  corporations  ;  exports  had 
risen  to  £48,735,351  from  £40,831,744  in  1822;  im- 
ports had  reached  £42,680,954  from  £30,500,000  in 
1822.  This  prosperity  existed  until  the  autumn  of 
1825,  when  the  storm  of  financial  disaster,  which  had 
been  gathering  for  some  months,  burst  suddenly  upon 
the  country,  sending  dismay  to  the  hearts  of  the  people, 
and  spreading  ruin  through  the  land. 

"In  the  end  of  November,  the  Plymouth  bank  failed.  This  was 
followed  on  the  5th  of  December  by  the  fuiluie  of  the  house"  of  Sir 
Peter  Pole  &  Co.  in  London,  which  diffused  universal  consternation, 
as  it  had  accounts  with  fifty  country  banks.  In  the  next  three 
weeks,  seventy  banks  in  town  and  country  suspendi'd  payment.  The 
London  houses  were  besieged  from  morning  to  night,  by  clamorous 
applicants,  all  demanding  cash  for  their  notes  The  Bank  of  Eng- 
land itself  liad  the  utmost  difficulty  in  weathering  the  storm,  and 
numerous  applications  were  made  to  government  for  an  order  in 
council  suspending  cash  payments.  But  this  was  ste.(dily  refused  so 
long  as  the  Bank  had  a  guinea  left;  and  meanwhile  the  con  tenia  ion 
over  the  whole  country  readied  the  highest  point  Evt  ry  creditor 
pressed  his  debtor,  who  souglit  in  vain  f>r  money  to  di-^chatye  his 
debts.  The  bankers,  on  the  verge  of  insolvency  themselves,  sternly 
refused  accommodation  even  to  their  most  approved  customers. 
Persons  worth  £100,000  could  not  command  £100  to  save  themselves 
Irom  ruin." — Alison. 


rnfA2sCIAL,  COMMERCIAL   AND    DOMESTIC.  249 

The  cause  of  this  "was  not  the  condition  of  commerce, 
for  it  "Nvas  steadily  increasing  and  in  a  healthful  condi- 
tion, the  exijorts  of  1825  being  £6,000,000  greater 
than  imports.  The  exports  had  exceeded  the  imports 
for  a  series  of  years.  Credit  was  not  the  cause,  for  in 
that  year  it  was  low — only  £7,691,4(3-4  in  discounts  at 
the  Bank  of  England,  which  was  £5,000,000  less  than 
it  had  been  in  the  year  1816  and  £13,000,000  than  that 
of  1815.  There  was  no  war;  no  failure  of  crops — 
nothing  which  could  produce  such  a  crisis  prior  to  the 
contraction  of  currency. 

The  Cause. — On  account  of  expenditures  of  English 
capitalists  on  their  South  American  mines,  large 
amounts  of  coin  were  needed  by  them.  This  created  a 
pressure  on  all  the  banks  for  the  precious  metals,  and 
the  country  banks  being  unable  to  supply  the  demand 
aj^plied  to  the  Bank  of  England.  This  resulted  in  a 
reduction  of  specie  in  its  vaults  from  £14,200,000  to 
£8,779,000  between  July  and  November,  and  ulti- 
mately to  £1,000,000  in  December.  The  Bank  at 
once  proceeded  to  draw  in  its  notes  and  reduce  its 
circulation  in  order  to  insure  safety.  This  was  done  so 
rapidly  that  its  outstanding  notes  fell  to  £17,709,000 
in  the  first  week  in  December  from  £26,000,000  in  the 
summer,  and  the  entire  bank  circulation  was  reduced 
during  the  same  time  from  £40,000,000  to  £31,000,- 
000.  This  enormous  contraction  in  the  space  of  two 
or  three  months  unsettled  all  business,  brought  prices 
down  and  almost  bankrupted  the  country.  It  may  be 
proper  here  to  ex-j^lain  that  the  charter  of  the 
Bank  of  England  was  such  that  its  paper  circulation 
was  regulated  by  the  amount  of  coin  in  its  vaults,  and 
although  its  notes  were  legal  tender  all  over  the  king- 


250  OUTLINE    OF   ENGLISH   HISTORY  : 

dom  for  everything,  yet  they  were  by  law  required  to 
be  redeemed  by  the  Bank  in  coin,  whenever  presented. 
The  country  bank  issues  were  redeemable  in  Bank  of 
England  notes  or  coin,  so  that  whenever  a  demand  for 
gold  arose  for  any  purpose,  the  country  banks  and  peo- 
ple applied  to  the  Bank  of  England  with  its  notes, 
which  were  then  paid  in  specie.  If  coin  became  scarce, 
the  Bank  was  compelled,  in  consequence  of  the  pro- 
visions of  the  law,  to  retire  a  sufficient  quantity  of  its 
notes  to  bring  itself  within  the  bounds  of  safety. 
Thus  it  was  that  when  coin  was  scarcest  and  most  paper 
money  was  needed  there  was  least  of  it,  and  when  coin 
was  plentiful  and  there  was  least  need  of  paper  money, 
there  was  most  of  it.  The  whole  banking  system  of 
England  was,  in  effect,  although  not  in  terms,  based  on 
coin,  and,  consequently,  subject  to  all  vicissitudes  in- 
cident to  the  constantly  varying  volume  of  the  precious 
metals,  resulting  from  their  migratorv  tendencies. 

The  Remedy. — "  In  this  extremity,  government,  despite  their 
strong  reliance  on  metallic  currency,  were  iairly  driven  into  the  only 
measure  which  con  d  by  possibility  save  the  country.  It  was  evident 
to  all,  what  the  ciash,  which  threatened  universal  ruin,  was  owing 
to.  It  arose  from  the  currency  of  tiie  country  being  suddenly  con- 
tracted in  consequence  of  the  drain  of  specie  from  the  banks  at  the 
very  time  when  an  expansion  of  it  was  most  called  for  to  sustain  the 
immense  engaLiements  of  the  people.  The  remedy  was  obvious— ex- 
pand the  circulation  irrespective  of  the  drain  of  gold.  This  accord- 
ingly was  done  by  goveriiment.  Immediately  after  the  failure  of 
Cole  &  Co. 's  bank  frequent  cabinet  councils  were  held;  and  it  was 
at  length  wisely  determined  to  issue  one  and  two  pound  notes  of  the 
Bank  of  Kngland  for  country  circulation.  Orders  were  sent  to  the 
Mint  to  strain  every  nerve  for  the  coinage  of  sovereigns;  and  for  a 
week  l.")0, 000  sovereigns  were  thrown  off  daily.  But  here  a  fresh 
difficulty  presented  itself.  Such  was  the  demand  for  the  Bank  of 
Kngland  notes,  t!iat  no  amount  of  strength  applied  to  throwing  them 
off  could  enable  the  bank  to  keep  pace^with  it.  In  this  dilemma, 
when  the  spece  in  their  cotters  was  nduced  to  £1,000,000  and  runs 
(for  coin)  were  daily  increasing,  an  accidental  discovery  relieved  the 
bank  of  their  immediae  difficulties  and  enabled  them  to  continue 
the  issues  to  the  country  bankers,  which  saved  the  country  from 
total  ruin.  An  o'd  box  containing  £7U0,0i'0,  in  one  and  two  pound 
notes,  which  had  been  retired,  was  accidently  discovered  in  the 


FINANCIAL,  COMMERCIAL    AND    DOMESTIC.  251 

Bank  of  England  and  immediately  issued  to  the  public  By  this 
means  the  demand  was  supplied  till  the  new  notes  could  be  thrown 
off.  The  efl'ects  were  soon  apparent.  The  people  having  got  notes,' 
abated  their  demand  for  gold;  c  intidonce  b'gau  to  revive,  because 
the  means  of  discharging  obligations  were  afforded;  and  at  a  meet- 
ing of  bankers  and  merchants  in  the  city  of  London,  resolutions  de- 
claratory of  confidence  in  government  and  the  Bank  of  England  were 
passed,  which  had  a  great  effect  in  restoring  general  confidence. 
So  vigorously  were  the  new  measures  carried  into  effect  that  the  cir- 
culation of  the  Bank  of  Englan<l,  which  on  the  '6  d  of  Dccembi  r  had' 
been  only  £17,000,000,  was  so  raided  that  on  tlie  24th of  Di'cembcr  it 
was  £25,611  800.  Thus  was  the  crisis  surmounted,  tliough  its  con- 
sequences long  continued,  and  left  lasting  effects  on  the  legislation 
and  destinies  of  the  nation.  Markwortliy  circumstance'  The 
danger  was  overcome,  not  by  any  increase  in  the  metallic  treasure  of 
the  country,  but  by  a  great  issue  of  paper  when  there  was  no  specie 
to  sustain  it.  " — Alison. 

The  total  issue  of  bank  paper  increased  from  £31,- 
000,000  in  the  first  week  in  December,  to  £40,000,000 
on  the  25th  of  same  month.  This  was  a  short  but  sharp 
and  dreadful  panic.  We  give  its  history  because  it 
was  the  bes-innino:  of  a  Ions;  season  of  financial  disas- 
ters,  and  exhibits  the  wonderful  and  rapid  effects  which 
may  attend  contraction  or  expansion  of  the  currency. 

i^-^^.—Although  the  issue  of  £9,000,000  of  bank 
paper  between  the  3rd  and  25th  of  December,  1825, 
averted  the  panic  and  saved  the  country  from  a  univer- 
sal financial  crash,  yet  it  Avas  not  equal  to  restoring  en- 
tire confidence  and  making  business  prosperous,  because 
the  law  requiring  cash  payments  at  the  bank  still  exis- 
ted and  the  people  and  the  bank  were  held  in  constant 
dread  of  a  recurrence  of  the  catastrophe  of  December. 
The  Bank  of  P]ngland  was  almost  entirely  depleted  of 
coin,  and  just  so  soon  as  the  panic  was  over,  it  and  the 
country  banks  again  proceeded  to  contract  their  issues, 
resulting  in  a  reduction  of  the  currency  from  £40,000,- 
000  on  December  25th,  1825,  to  £30,219,661  in  1826.' 
The  consequence  was  a  restriction  of  accommodations 
at  banks,  fall  of  prices,  reduction  of  work,  discharge  of 


252  OUTLINE    OF   ENGLISH   HISTORY: 

manufactory  hands,  much  distress,  want,  and  suffering, 
and,  in  many   places,  the   most   appalling   proofs  of 

wretchedness. 

''The  great  distress,  as  usual  in  such  cases,  led  to  serious  acts 
of  riot  in  several  of  the  manufacturiug  districts.  The  recent  im- 
provements in  machinery  were  generally  regarded  as  the  main  cause 
of  the  general  suffering,  and  in  Lancashire  the  indignation  of  the 
operatives  against  what  they  deemed  an  invasion  of  tlieir  birthrights, 
broke  out  in  various  and  most  melancholy  acts  of  outrage.  It  was 
a  woeful  spectacle  to  see  the  streets  of  Manchester,  and  the  chief 
towns  in  its  viciuity,  with  vast  crowds,  sometimes  ten  thousand  in 
number,  whose  wan  visages  and  lean  figures  but  too  clearly  told  the 
tale  of  their  sufferings,  snatching  their  food  from  bakers'  shops, 
breaking  into  factories  and  destroying  power-looms,  mills,  and 
throwing  stones  at  the  military,  at  tlie  hazard  of  being  shot,  rather 
than  relinquish  an  object  on  the  attainment  of  which  they  sincerely 
believed  their  very  existence  dt-pended.  berious  riots  took  place  in 
Carlisle;  and  in  Norwich,  where  twelve  thousand  weavers  were  em- 
ployed, an  alarming  disturbance,  attended  with  gn^at  violence,  oc- 
curred. In  all  the  iron  districts,  strikes  to  arrest  the  fall  of  wages 
took  place;  and  in  Dublin  and  Glasgow  immense  crowds  of  opera- 
tives paraded  the  streets  entreating  relief," 

The  Cause. — The  falling  off  in  exports  from  £48,- 
735,550  in  1825  to  £40,965,735  in  1826,  and  of  im- 
ports, from£42, 660,000  in  1825  to £37,686,000  in  1826, 
was  not  the  cause  of  the  disasters,  because  the  crisis  of 
1825  and  the  stringency  beginning  vnth.  the  beginning 
of  1826  preceded  the  decrease  of  commerce.  The 
improved  machinery,  complained  of  by  workmen,  was 
not  the  cause,  for  the  reason  that  no  revolution  in  the 
method  and  means  of  manufacturing  took  place  in  that 
year  ;  and  for  the  further  reason  that  improved  ma- 
chinery does  not  lessen  the  demand  for  wages  of  labor, 
because  it  lessens  the  cost  of  producing  the  manufac- 
tured article  ;  this  puts  it  in  the  power  of  a  greatly 
increased  number  of  people  to  buy  the  article  h,nd 
laro-cly  increases  the  demand  ;  this  again  calls  for  more 
hands  to  work  the  machinery,  and  thus  increases  the 
demand  for  labor.  There  was  no  lack  of  bread,  for 
the  country  was  blessed  with  abundance.     There  was 


FINANCIAL,  COMMERCIAL   AND    DOMESTIC.  253 

no  war,  nothing  to  cause  the  want,  WTetchedness,  riots 
and  strikes  above  detailed,  but  the  rapid  contraction  of 
the  currency  as  above  particuhirized.  The  distress 
was  enhanced,  and  the  contraction  accelerated  by  the 
heavy  exportations  of  coin  by  capitalists,  on  account 
of  their  liabilities  arising  from  their  South  American 
mines.  The  immense  investments  in  railroad  building, 
which  had  sprung  up  lately,  also  added  to  the  complica- 
tions and  aggravated  the  suffering  of  the  country. 

The  Remedy. — Notwithstanding  the  attachment  of 
government  and  the  House  of  Commons  to  the  cheap- 
ening system,  and  their  determination  to  enhance  the 
value  of  money  by  reducing  values  of  property  to  a 
specie  basis,  the  necessities  of  the  country  drove  them 
to  adopt  some  measures  of  an  opposite  tendency.  The 
first  was  an  act  permiting  private  bankers  to  have  an 
unlimited  number  of  partners,  instead  of  six,  to  which 
they  had  been  restricted  by  law.  This  gave  more 
capital  and  strength  to  these  banks,  and  enabled  them 
to  extend  accommodations.  The  second  was  an  act 
authorizing  the  establishment  of  branches  of  the  Bank 
of  England  in  the  country  towns.  This  gave  a  wider 
circulation  to  the  small  notes  of  that  bank  during  the 
three  years  they  had  to  run.  The  third  was  an  act 
guaranteeing  £3,000,000  of  advances  by  the  bank,  on 
goods  and  other  securities,  to  merchants  and  manufac- 
turers. These  sensibly  averted  the  effects  of  the  crisis 
of  December,  1825,  and  the  stringency  of  1826,  and 
brought  a  slow  but  steady  relief  to  the  country  until 
the  summer  of  1829. 


CHAPTER  XVn. 


OUTLINE    or  ENGLISH  HISTORY. 
FINANCIAL.  COMMERCIAL    AND    DOMESTIC. 

1829  TO  1833. 

With  the  latter  part  of  1829  began  a  period  of  strin- 
gency in  money  matters,  depression  in  business,  losses, 
bankruptcies,  riots,  strikes,  predial  crimes,  incendia- 
rism, insurrections,  agitations  and  outrages,  disastrous 
and  appalling.  From  1829  to  the  latter  part  of  1833, 
a  deeper  gloom  and  distresses  more  general  and  acute 
afflicted  the  country  than  all  the  disasters  of  the  21 
years'  war  vnih  France.  To  attempt  to  follow  up  and 
give  individual  cases  of  bankruptcy,  ruin  and  distress 
would  be  a  vain  and  useless  effort.  On  the  assembling 
of  Parliament,  in  February,    1830,    the   King   in   his 

speech  said  : 

"The  exports  in  the  last  year  of  British  produce  and  manu- 
factures had  exceeded  that  of  any  former  year.  He  laments  that, 
notwithstanding  this  indication  of  an  active  commerce,  distress 
should  prevail  among  the  agricultural  and  manufacturing  classes  in 
some  parts  of  the  United  Kingdom.  It  would  be  most  gratifying 
to  the  paternal  feelings  of  his  majesty  to  be  enabled  to  propose  for 
your  consideration  measures  calculated  to  remove  the  difficulties  of 
any  portion  of  his  subjects  and  at  the  same  time  compatible  with  the 
genL,ral  interests  of  his  people." 

Of  the  distress  of  the  times.  Earl  Stanhope  said  : 

"The  speech  from  the  throne  spoke  of  distress  in  some  parts  of 
the  country ;  but  what  part  of  the  country  was  it  in  which  Ministers 
had  not  found  distress  prevailing,  and  that,  too,  general,  not  partial? 


FINANCIAL,  COMMERCIAL    AND    DOMESTIC.  255 

The  Kingdom  is  in  a  state  of  universal  distress — one  likely 
to  be  unequalled  in  its  duration,  as  it  is  intolerable  in  its  pressure, 
unless  Parliament  think  fit  to  incjuire  for  a  reniedv  It  is  not  con 
fined  to  agriculture;  it  has  extended  to  manufactunn<r,  to  trade  and 
to  commerce.  All  these  jrreat  interests  had  never  before  it  one 
time,  been  at  so  low  an  ebb,  nor  in  a  condition  which  demanded 
more  loudly  the  prompt  and  energetic  interference  of  Parliament 
The  speecli  ascribed  the  distress  which  was  so  uninersal  to  a  bad 
harvest;  but  did  a  bad  harvest  make  corn  cheap?  and  yet  it  is  the  ex- 
cessive reduction  of  ])rices  which  is  now  felt  as  so  great  an  evil,  es- 
pecially by  the  agricultural  classes.  The  evil  is  so  notorious  that 
nobody  but  the  King's  Ministers  doubt  its  existence.  And  how  could 
eveu  they  deny  it  if  they  cast  their  eyes  around  and  saw  the  counties 
spontaneously  pouring  on  them  every  kind  of  solicitation  for  relief; 
while  in  towns,  Mr.  Alderman  Waithman  has  attested  the  stocks  of 
every  kind  have  sunk  in  value  40  per  cent  ? 

"There  can  be  no  uoubt  to  wh:it  this  universal  distress  is  owing, 
it  is  to  be  ascribed  to  the  erroneous  basis  on  whicii  our  currency  has 
been  placed  since  1819.  Prices  have  not  fallen  in  agricultural  pro- 
ducts only;  the  depre^siou  has  been  cuntinuuus  and  universal  ever 
since  the  Bank  Restriction  Art  passed,  and  especially  since  the  sup- 
pression of  small  notes  took  efffct  in  the  beginning  of  the  year.  All 
these  tilings  have  sunk  in  value  together;  and  in  manufactures  and 
traders'  stocks  the  fall  has  been  so  Ln-eat  th.it  in  the  last  ten  years 
it  ha-<  amounted  to  68  per  cent.  Such  a  universal  and  continued  de- 
pression can  be  ascribed  only  to  some  cause  pressing  alike  upon  all 
branches  of  industry,  and  that  cause  is  t  >  be  found  in  the  enormous 
contraction  of  the  currency  which  has  taken  place  When  we  recol- 
lect that  the  Bank  of  Jlngland  notes  in  circulation  have  been  re- 
duced from  £30,000,000  to  £20,000,000,  and  the  country  bankers- 
notes  in  a  still  greater  proportion,  it  is  easy  to  see  whence  the  evil 
has  arisen,  and  where  a  remedy  is  to  be  found." 

Following  are  given  the  outlines  of  some  of  the  com- 
motions, outbreaks,  riots,  and  other  demonstrations 
expressive  ot  the  agony  and  suffering  of  the  common 
people : 

1829.— "  Manufacturers' stocks  had  fallen  in  price  40  per  cent. 
This  great  fall  in  prices  pervaded  all  branches  of  industry,  both  ag- 
ricultural and  manufacturinir,  and  caused  a  corresponding  and  dis- 
tressing fall  in  wages,  and,  in  many  places  an  entire  cessation  .n 
demand  for  labor.  In  many  places  two  and  a  half  pence  a  day  was 
the  amount  paid  for  labor.  This  lamentable  fall  in  wages  of  'abor 
was  soon  attended  by  its  usual  consequences— a  variety  of  outbreaks 
and  disturbances  in  the  districts  which  were  more  immediately  affec- 
ted. Constrained  by  the  general  fall  in  the  price  of  their  produce  to 
lessen  the  cost  of  production,  the  masters  everywhere  lowered  the 
"wases  of  their  workmen,  and  this  Immediately  gave  rise  to  strikes 
and  disturbances.  A  general  strike  took  place  at  Macciesflcid,  and 
the  delegates  from  Spitalfiolds  openly  recommended  the  destruction 
of  looms  by  cutting  out  the  silks.     Ignorant  of  the  real  cause  of  their 


256  OUTLINE    OF    ENGLISH    HISTORY; 

sufferings,  the  whole  vengeance  of  the  working  men  was  directed 
against  the  engine-looms,  the  visibi ;  rival  of  their  labor,  and  the 
supposed  source  of  their  distress.  The  d  legates  assured  them  that 
'  the  destroying  angel  was  the  best  ally  they  had.'  n  jr  were  they  l')ng 
of  acting  upon  the  advice.  At  C>veiitry,  Nuueatou,  and  Beadworth 
serious  strikes  took  place  ;  and  such  was  the  terror  produced  by  the 
violence  of  the  workmen,  that  the  masters  generally  gave  in  for  a 
time  to  their  demands.  They  soon  found  it  impossible,  however,  at 
existing  prices,  to  go  on  wiih  siicli  wages,  and  a  reduction  again 
took  place.  Upon  this,  riots  agan  ensiud,  and  they  were  particu- 
larly violent  at  Barnsley,  in  Yorkshire,  where  the  combined  working- 
men  atiacked  the  dwelling  houses  of  obnoxious  manufacturers  and 
deliberately  piled  their  furniture  in  great  heaps  to  which  they  set 
fire.  The  workmen  who  had  taken  in  work  at  the  reduced  prices 
were  next  assailed ;  and  such  was  the  alarm  produced  by  this  'reign 
of  terror,'  as  it  was  called,  thit  they  were  compelled  to  return  the 
materials  they  had  received  from  their  masters  and  join  the  strike." 
— Alison. 

The  extreme   suffering  of  Ireland  during  the  same 

year  made  the  time  opportune  for  politicians  to  excite 

the  people.     There  was  no  lack  of  such  leaders,  and  a 

violent  agitation  arose  for  the  repeal  of  the  Union.  Mr. 

O'Connel  was  the  leader,  and  in  the  peroration  to  one 

of  his  warmest  speeches  said  : 

"The  new  society  of  1782  shall  be  formed  nor  cease  to  spread  its 
influence  over  Ireland  till  her  Pmliaraenr.  be  restored,  her  sons  be  of 
one  creed,  all  joined  in  common  cau-e  of  seeing  old  Ireland  great  and 
glorious  among  the  nations  of  Europe  " 

The  Catholics  at  once  embraced  the  project.  The 
Protestants  as  Ciuickly  opposed  it,  fearing,  if  successful, 
it  might  result  in  religious  proscription.  Thence  result- 
ed the  most  serious  consequences.  In  Clare  County 
the  two  parties  met,  one  armed  with  muskets  and  bay- 
onets, the  other  with  scythes  and  pitchforks  ;  and  a 
conflict  ensued  in  which  lives  were  lost  and  much  dam- 
ao^e  done.  The  Count v  of  Fermau^h  assumed  the  as- 
pcct  of  open  war.  Catholics  to  the  number  of  some 
thousands  encamped  on  Benauglen  Mountain,  to  which 
reinforcements  speedily  poured  in  from  the  adjoining 
counties.  A  large  body  of  military  only  prevented 
open  civil  war. 


FINANCIAL,  COitMERCIAL    AND    DOMESTIC.  257 

"Before  the  jrreat  strife  of  parties  began  in  Parliament,  symptoms 
of  discontent  attended  with  danger  and  alarm  began  in  several  agri- 
cultnral  districts.  It  h  id  been  predicted  that,  unless  relief  was 
granted  in  answer  to  petitions  which  had  been  sent  in  for  several 
years  by  agriculturalists,  the  working  cl.i-Jses  won'd  break  out  in  open 
acts  of  violence.  This  prediction  was  now  verified.  Tiie  disturb- 
ances b'^gan  in  Kent,  from  which  they  rapidly  spread  to  Surrey,  Sus- 
sex, Hampshire,  Wiltshire  and  Buckiiighainshire.  Night  alter  night 
new  confliigrations  were  lisrhted  up  by  binds  of  incendiaries;  com 
stacks,  barns,  farm  buildings,  and  live  cattle  were  indiscriminately 
consumed.  Bolder  bands  attacked  mills  and  demolished  machinery ; 
tlireshing  mills  were  in  an  especial  manner  the  object  of  their  hos- 
tility. i)uriiig  October  and  November,  these  acts  of  incendiarism 
became  so  frequent  as  to  excite  universal  alarm,  and  it  was  not  till 
several  examples  were  made  by  a  special  commission  sent  into  the 
disturbed  districts,  and  a  larire  body  of  military  quartered  in  them, 
that  they  were  at  length  put  down." — Alison. 

The  reception  of  the  King  by  the  Lord  Mayor  of 
London,  on  the  9th  day  of  November,  an  ancient  and 
honorable  custom,  was  postponed  for  fear  of  violence 
and  a  general  uprising  of  the  people.  Thousands  of 
handbills  had  been  printed  and  circulated,  calling  on 
the  people  to  come  armed  on  the  occasion.  Such  no- 
tices as  these  were  widely  circulated  : 

"To  arms!  Liberty  or  death!  London  meets  Tuesdny  next.  An 
opportunity  not  to  be  lost  for  revengins  the  wmngs  we  have  suffered 
so  long.     Come  armed,  be  firm,  and  victory  must  be  ours." 

"Englishmen,  Britons,  and  honest  men :  the  time  has  at  length 
arrived,  and  all  London  meets  on  Tuesday.  Come  armed.  We  as- 
sure you  from  ocular  demonstration,  six  thousand  cutlasses  have 
been  removed  from  the  Tower  for  the  immediate  use  of  Peel's 
bloody  gang.  Remember  the  cursed  speech  from  the  Throne.  These 
damned  police  are  to  be  armed.  Englishmen,  will  you  put  up  with 
this?" 

Their  intention  was  to  have  a  great  riot  in  London 
and  tittack  the  ^Ministers  of  Government.  The  effects 
of  the  announcement  of  this  conspiracy  were  immense. 
The  most  alarming  reports  were  spread,  and  the  people 
imagined  that  the  awful  scenes  of  Paris  durinof  the 
French  Kevolution  were  to  be  enacted  in  the  streets  of 
London.  The  panic  was  general.  The  public  funds 
fell  3 J  per  cent,  in  two  hours.  But  the  King's  recep- 
tion was  deferred.     The  opportunity  for  the  acts  con- 


258  OUTLINE    OF   ENGLISH   HISTORY: 

templated  by  the  conspirators  being  removed,  no  vio- 
lence occurred.  Lord  Grey  said  in  Parliament  that  the 
southern  counties  around  London  "were  in  a  state  of 
open  insurrection."  The  condition  of  Ireland  was 
even  worse.  Riots,  incendiarism  and  violent  agitation 
for  the  repeal  of  the  union  distracted  that  suffering 
country  over  its  whole  length  and  breadth. 

2831. — From  the  time  of  the  crisis  of  1825,  agita- 
tion for  reform  set  in,  and  in  1831  it  culminated  in  the 
introduction  of  a  bill  to  that  end,  the  main  feature  of 
which  provided  for  a  great  change  in  the  basis  of  rep- 
resentation. Parliament  was  prorogued  and  the  canvass 
for  the  fall  elections  was  marked  ^nih.  the  most  brutal 
violence.  The  brickbat  and  bludgeon  were  freely  used. 
Opposers  of  the  bill  were  daubed  with  mud  and  ducked 
in  mill  ponds,  and  their  windows  were  smashed  in.  The 
Lord  Provost  of  Scotland  was  seized  by  the  mob  on  the 
day  of  the  election,  and  an  effort  made  to  throw  him 
over  North  Bridge.  The  mob  continued  their  depreda- 
tions through  the  whole  day.  At  Ayr  the  opposers  had 
to  flee.  In  London  the  windows  of  the  Duke  of  Wel- 
lington, Mr.  Baring,  and  other  leading  anti-reformers 
were  all  broken.  At  Lanark  a  dreadful  riot  occurred, 
and  the  Conservative  candidate  Avas  seriously  wounded 
in  a  church  where  the  election  was  held.  At  Dunbar- 
ton  the  Tory  candidate.  Lord  William  Graham,  escaped 
death  by  being  concealed  in  a  garret  all  day.  At  Jed- 
burg  a  band  hooted  the  dymg  Sir  Walter  Scott. 

The  political  unions  formed  to  force  the  carriage  of  the 
Eeform  Bill.  They  were  thoroughly  organized  and 
claimed  to  be  able  to  muster  two  armies,  either  of  which 
was  as  large  as  the  allied  army  at  Waterloo,  and  threat- 
ened to  march  on  London.     The  political  unions  to  the 


FINANCIAL,  COMMERCIAL    AND    DOMESTIC.  259 

number  of  150,000  assembled  at  Birmin<2:ham  and  peti- 
tioned the  King.  They  portrayed  the  awful  consequences 
which  might  ensue  on  a  rejection  of  the  bill.  Their  lan- 
guage and  demonstrations  at  the  mectino:  were  violent  in 
the  extreme.  Similar  meetings  were  held  at  Liverpool, 
Newcastle,  Edinl)urgh,  Glasgow,  and  all  the  great  towns, 
at  all  of  which  the  most  violent  lan<mao^e  was  used,  and 
the  most  revolutionar}'-  ensigns  were  displayed.  At 
Derby  the  mob  demolished  the  windows  of  anti-reform- 
ers. Some  of  the  leaders  were  thrust  into  jail,  but  the 
mob  broke  the  doors  and  rescued  them.  At  Nottinsf- 
ham  they  stormed  the  castle  of  the  Duke  of  Newcastle, 
sacked  and  burned  that  venerable  structure  to  the 
ground.  They  burned  other  houses  in  the  rural  dis- 
tricts. At  Bristol  they  gathered  in  great  numbers  in  the 
streets  and  about  the  Mansion  House,  hissino;,  crroanina', 
and  throwing  stones  and  brickbats  at  the  anti-reform 
leader,  Sir  Charles  Wetherall.  Tlie  riot  act  was  read 
to  them  ;  this  infuriated  them.  The  constables  were 
attacked  and  driven  back ;  the  Mansion  House  was 
stormed  and  its  furniture  smashed  and  pillaged,  and  the 
iron  railings  in  front  taken  as  weapons  by  the  rioters. 
The  occupants  of  the  house  escaped  through  back  waj^s. 
The  mob  then  stormed  the  Council  House,  but  beins: 
charged  by  the  military  dispersed.  Next  day  thousands 
were  added  to  the  mob.  The  barijemen  from  the  neiirh- 
boring  canals  flocked  in  on  all  sides,  and  those  wild- 
looking  haggard  desperadoes  began  to  appear  in  the 
streets. 

"Thus  reinforced,  the  mob  returned  on  the  following  mornine;, 
broke  open  and  r:insacked  the  cellars  of  the  Mansion  House,  and 
soon  intoxicated  wretches  added  the  fumes  of  drunkenness  to  the 
horrors  of  the  Scene.  " 

There  now   being   nothing   more  to  destroy  at  the 


260  OUTLINE    OF   ENGLISH   HISTORY  ' 

Mansion  House  the  rioters  dispersed  in  bodies  over  the 
city.     The  most  frightful  scenes  of  violence  and  devas- 
tation ensued.    One  detachment  proceeded  to  the  Bride- 
well, where  they  broke  open  doors,  liberated  prisoners, 
who  immediately  joined  them,  and  set  the  building  on 
fire.     Another  went  to  the  new  jail,  which  was  also 
broken  open,  the  prisoners  liberated  and  the  building 
consigned  to  flames.      The    Gloucester   County  prison 
shared  the  same  fate,  and  the  chief  toll-houses  around 
the  town  were  destroyed.     A  band  next  proceeded  to 
the  Bishop's  palace,  which  was  set  on  fire  and  totally 
consumed.     The  Mansion  House  shared  the  same  fate, 
and  not  content  with   this,  the   rioters    set   fire  to  the 
Custom  House,  Excise  Office,  and  other   buildino;s  in 
Qiieen  Square,  which  soon  were  wrapped  in  one  awful 
conflagration.     An  attempt  was  made  to  fire  the   ship- 
ping in  the  docks,  but  hapjiily  repulsed  by  the  vigilance 
and  courage  of  seamen.       Exclusive    of   the   Mansion 
House,  Jails,  and  other  public   edifices,  forty-two  pri- 
vate houses  and  warehouses  were  burnt,  and  property 
to  the  amount  £500,000  destroyed.      During  the  riot 
many  lives  were  lost. 

1832. — During  the  pendency  of  the  new  reform  bill, 
decisive  proof  of  the  ungovernable  and  revolutionary 
spirit  of  the  times  exhibited  itself.  The  political 
unions  and  radicals  assembled  in  great  numbers,  and 
the  violence  of  their  speeches  exceeded  anything  which 
had  yet  transpired.  Threats,  denunciations,  predic- 
tions of  approaching  and  organized  rebellion  formed 
the  staple  of  the  harangues.  At  Liverpool,  Glasgow, 
Edinlmrg,  Manchester,  Leeds,  Paisley,  Sheffield  and  all 
the  great  towns,  meetings  attended  b}-"  30,000  or  40,000 
persons  were  held,  at  which  violent  threats  were  re- 


FINANCIAL,  COMMERCIAL   AND   DOMESTIC.  261 

peated,  and  revolutionary  ensigns  were  displayed.     The 

National  Union,  on  the  3d  of  May,  declared   that  if 

the  Heforni  Bill  was  defeated,  the  jpayinent  of  taxes 

would  cease,  the  other  obligation  of  society  would  be 

disregarded,  aud  the  ultimate  consequences  might  be  the 

extinction  of  the  priviledged  orders.     The  Reform  Bill 

passed  and  became  a  law,  but  it  did  not  relieve  the 

country.      The  greatest  disorders,  distraction,  distress 

and  threatened  revolution  existed  in  Ireland. 

"  The  scene  of  predial  violence  and  bloodshed  which  followed 
those  savage  denunciation-^  had  never  been  paralleled  in  Europe, 
save  in  the  Jacquerie  of  Fr.ince,  and  the  most  violent  excesses  of 
the  insurrection  of  the  Boors  in  Germany." 

1833. — Mr.  Attwood,  member  of  Parliament,  said  : 

**  Distress,  general,  extreme,  unnatural,  is  greater  than 
in  any  former  period  of  our  history." 

The  violence  which  had  distressed  the  country  for 
years  began  to  pass  away  in  1833.  Business  assumed 
more  vigor,  and  men's  countenances  bore  a  more  cheer- 
ful aspect. 

The  Causes. — England  had  engaged  in  no  war  since 
the  fall  of  Bonaparte.  She  owed  no  debt  abroad 
which  drained  her  coffers,  her  debt  being  owned  at 
home.  The  taxes  had  been  reduced.  The  revenue 
and  expenditures  of  the  government  had  been  decreased. 
Her  subjects  had  a  full  measure  of  personal  liberty ; 
and  all  their  industries,  agriculture,  manufactures, 
mines,  shipping  and  fisheries,  yielded  abundantly  under 
the  fostering  and  protecting  care  of  the  government. 
No  calamity  had  befallen  the  nation  ;  no  famine  had 
starved,  nor  pestilence  destroyed — excepting  the  chol- 
era one  season.  Excepting  Ireland,  which  has  always 
been  restless  under  the  yoke  of  British  government, 
there  was  no  sectional,  local  or  class  quarrel.     Except- 


262  OUTLI3S1E    OF   ENGLISH   HISTORY: 

ing  the  payment  of  tithes  to  the  church  of  England, 
and  the  differences  between  catholics  and  protestants 
in  Ireland  —  and  these  things  were  not  peculiar  to  the 
period  of  time  under  re\'iew — there  was  no  church 
question  to  disturb  the  peace.  Commerce  had  been  in. 
a  healthful  state  for  a  number  of  years,  both  exports 
and  imports  steadily  increasing,  the  former  always 
exceeding  the  latter,  except  for  the  year  1829,  which 
was  marked  by  a  great  falling  off  of  exports  and  an 
excess  of  imports  over  the  exports.  The  government 
owed  an  enormous  debt  of  nearly  $4,000,000,000,  con- 
tracted under  the  French  war,  but  it  was  nearly  all  owned 
by  British  subjects,  and  the  interest  was  at  the  low 
rates  of  from  three  to  four  per  cent.,  so  that  the  annual 
expenses  of  the  public  debt  were  but  little  over 
those  of  the  United  States  at  this  time,  and  the  interest 
being  paid  to  Englishmen  the  money  was  kept  in  that 
country  instead  of  being  sent  abroad,  as  is  the  case 
with  the  United  States  now. 

The  internal  and  external  relations  and  conditions  of 
the  government  and  country  were  healthful.  And  yet, 
during  all  these  years,  from  1829  to  1833,  one  continu- 
ous Avail  of  distress  pierced  the  heart,  and  riot,  con- 
flai^ration  and  bloodshed  startled  the  sense  of  the 
country. 

In  reviewing  this  history,  one  is  forced  to  conclude 
that  the  vicissitudes  of  the  currency,  and  the  contrac- 
tion of  the  volume  of  money  below  the  needs  of  the 
country,  were  the  direct  causes  of  commercial  and  finan- 
cial distress,  and  the  irritating  causes  which  excited 
every  other  feeling  of  discontent  and  aroused  the  suf- 
fering laborers  and  gave  occasion  to  desperate  charac- 
tci'S  to  engage  in  riots,  strikes,  house-burnings,   insur- 


FINANCIAL,  COMMERCIAL    AND    DOMESTIC. 


263 


rection  and  bloodshed.  Below  we  give  two  tables,  one 
showing  the  Bank  note  paper  in  circulation  and  the 
amount  of  commercial  paper  discounted  at  the  Bank  of 
England  from  1815  to  1834  inclusive,  the  other  show- 
ing the  amount  of  exports  and  imports  during  the  same 
time  : 


Notes 

' 

Notes 

Year. 

Paper  Money 

Discounted 

Year. 

Paper  Money. 

Discounted 

1815.. 

£46,270,650. 

.  £20,600,000 

1825.. 

£40  000,000"  Dec.  25th 

1816.. 

42,090,620. 

.      11,182  000 

1825.. 

£7  691,464 

1817.. 

43,294,9(10. 

3,960,600 

1826.. 

30,219,661.. 

7,369,749 

1818.. 

49,278,700. 

.       5,113,748 

1827.. 

32,732,900.. 

3,389,725 

1819.. 

40,928,428. 

6,321,748 

1828.. 

31,478,988.. 

3,322,754 

1820.. 

34,145  395. 

.       4,672,123 

1829.. 

27  674,517.. 

4,589,370 

1821.. 

30,727,630. 

.       2,722,.i87 

1830.. 

26,965,096.. 

3,654,071 

1822.. 

26.588,600. 

.       3,622,151 

1831.. 

26,452,846.. 

5,848,478 

1823.. 

28,096,544. 

.       5,624,698 

1832.. 

26.763,895.. 

3,247,169 

1824.. 

32,759,152. 

6,255,342 

1833.. 

27  684,014.. 

1825.. 

41,000,000 

In  first  half 

1834.. 

29,347,600.. 

1825.. 

31,000,000 

Dec.  5tli 

TABLE   OF   EX FOR 

TS   AND 

IMPORTS. 

Year, 

Exports. 

Imports. 

Year. 

Exports. 

Imports. 

1815.. 

£44,0.53,455. 

.  £31,822,053 

1826.. 

£40.965,735.. 

£37  686,113 

1816.. 

36,697  610. 

.      26,374,921 

1827.. 

52,219.280.. 

44,887  774 

1817.. 

41 ,558, .585. 

.     30,834,299 

1828.. 

52  797,455.. 

45,028,805 

1818.. 

44, ,564, 044. 

.     35,845,340 

1829.. 

35,522,627.. 

43,981,317 

1819.. 

35,634,415. 

.     29,681,640 

1830.. 

69,691,302.. 

46,245,241 

1820.. 

40,240,277. 

.     31,515,222 

1831.. 

71,429,004.. 

49,713,889 

1821.. 

40,240  277. 

.      30,729,769 

1832.. 

76,071,577.. 

44,586,741 

1822.. 

40,831,744. 

.     30,500  094 

1833.. 

(Not  known  to  author)  4(j  245,241 

1823.. 

44,286,533. 

.      34,591  260 

1 8.34 . . 

73,821,550.. 

49,.362,811 

1824.. 

43,804,372. 

.      36,056,-551 

1835.. 

78,376,731.. 

48,911,542 

1825.. 

48  735.5-51. 

.     42,660,954 

Sir  Archibald  Alison,  in  his  History  of  Europe,  in 
commenting  upon  the  public  clamor  for  reform  and 
assigning  a  cause  for  the  distresses  of  the  country, 
said : 

"A  circumstance  occurred  at  this  time  which  most  materially 
tended  to  swell  the  cry  lor  reform  in  Parliament,  by  increasing  the 
difficulties  under  which,  from  the  effect  of  leiiislative  measures,  the 
industrious  classes  labored.  By  the  act  passed  in  February,  1826, 
regarding  small  notes,  it  had  been  provided  thnt,  tliough  no  new 
stamps  were  to  be  issued  for  small  notes  after  its  date,  tlie  notes 
already  in  circulation  were  to  continne  to  circulate  and  be  received 
as  legal  tender  three  years  longer.  These  three  years  expired  in 
March,  1829,  and  all  notes  iu  England  below  £5  imm'  diately  disap- 
peared from  the  circulation.     Great  was  the  effect  of  this  "decisive 


264  OUTLINE    OF    ENGLISH    HISTORY  : 

change  upon  the  fortunes  and  -wellbeing  of  the  industrious  classes, 
both  in  town  and  country,  over  the  whole  nation.  Coinciding,  by  a 
singular  chance,  in  point  of  time,  with  the  sudden  conversion  of  so 
many  statesmen  and  legislators,  in  both  Houses  on  the  subject  of 
Catholic  claims,  and  the  passing  of  the  Relief  Bill  in  consequence, 
it  powerfully  tended  to  inflame  the  desire  for  radical  chansie,  by 
superadding  personal  and  private  distr'.-ss  generally  in  the  industri- 
ous classesto  indignation  at  public  measures,  distrust  in  public 
men.  The  diminution  in  the  circulation  in  consequence,  was  imme- 
diate and  decisive  These  considerations  explain  how  it  came  to 
pass  that  the  passion  for  reform,  unfelt  as  a  national  feeling  prior  to 
1820  became  gradually  stronger,  until  in  1832,  it  was  altogether  Ir- 
resistible. The  feeling  which  produc>  d  it  was  the  most  powerful 
which  can  agitate  an  intelligent  community,  and  which,  when  it  per- 
vades all  ranks  in  the  state,  ere  long  acquires  such  force  that  it 
must  obtain  its  entire  direction.  'Deliverance  from  evil!'  was  the 
universal  cry.  This  desire  which  had  acquired  such  force  and  in- 
tensity as  to'  have  become  a  perfect  passion  with  nearly  all  classes, 
and  especially  the  agricultural,  is  easily  explained  when  we  recollect 
how  deeply  all  interests,  and  especially  those  of  labor  and  produc- 
tion, had  been  affected  by  the  prodigious  change  of  prices  of  coramod 
ities  of  all  sorts,  from  grain  to  cotton,  which  had  been  effected  by 
the  successive  contractions  of  the  currency  in  1»19  and  182G.  With 
each  of  these  contractions  the  cry  for  reform  was  revived :  with  the 
last  it  became  so  powerful  as  in  six  years  wrought  an  entire  change 
in  the  feelings,  desires,  and  interests  of  all  cla^ses.  It  is  in  this 
reduction  of  l^rices  tliat  the  explanation  of  the  English  revolution, 
with  all  its  mighty  effects,  foreiiru  and  domestic,  is  to  be  found. 
Every  article  of  production  or  exchange  fell  gradually  in  price  after 
the  suppression  of  small  notes  in  1826.  tU  it  settled  at  about  two- 
thirds  of  its  former  amount.  There  was  no  clas  of  society,  save 
the  holders  of  realized  wealth,  which  was  not  affected  or  ruined  by 
the  change.  The  capitalists  and  fundholders  alone  were  benefitted; 
thence  the  cry,  that  the  rich  were  every  day  getting  richer,  and  the 
poor  poorer. '  This  was  no  senseless  popular  outcry:  it  was  the 
simple  statement  of  an  acknowledged  and  undoubted  fact.  The 
organs  of  the  moneyed  interest  made  a  boast  of  it,  when  after  the 
contraction  of  the  currency  had  worked  out  its  ful!  effects,  they 
said  their  mea-ures  had  made  the  sovereign  worth  two  sovereigns. 
They  had  done  so,  and  not  less  certainly  had  they  made  the  laborer's 
shiliiusi  only  sixpence.  They  had  halved  tl  e  remuneration  of  in- 
dustry^when  they  doubled  the  value  of  money.  The  two  effects 
were  "consistent  for  they  both  sprang  from  the  same  cause. 

"  This  constant  decline  of  fortunes  and  diminution  of  income  in 
the  largest,  most  industrious,  and  most  important  class  of  the  com- 
munity, was  felt  as  the  more  galling,  from  the  contrast  exhibited  at 
the  same  time  by  the  holders  of  realized  wealth,  who  were  every  day 
becomins  richer,  not  from  an  additi(m  to  their  incomes,  but  an  addi- 
tion to  its  exchangeable  value.  Every  holder  of  commodities  felt 
them  every  day  getting  cheaper;  the  longer  he  retained  them,  the 
worse  was  his" sale,  the  greater  loss  on  his  transactions.  Manufac- 
turers and  farmers  found  that  they  could  not  with  markets  constantly 
falling,  work  to  a  profit,  except  bv  saving  every  shilling  in  the  cost 
of  production,  and  lowering  to  the  uttermost  the  wages  of  their 


FINANCIAL,  COIVIMERCIAL   AND    DOMESTIC.  265 

workmen.  Tlience  a  stoadj'  fall  at  once  in  thf  profits  of  stock  and 
the  wages  of  labor,  aud  the  distressing  recurrence  of  strikes  and  or- 
ganization of  trades  union  to  arrest  tlie  decline.  Thence,  too,  the 
origin  of  the  sore  and  angry  feelings  between  the  employers  and  em- 
ployed, which  has  never  been  allayed,  and  has  so  much  aggravated, 
in  periods  of  distress,  the  danger  of  our  social  position.  All  classes, 
save  the  moneyed,  were  suflering  from  the  long  continuance  of  the 
fall  of  prices ;  and  this  general  suffering  produced  the  ill-humors 
which,  skillfully  directed  by  the  popular  leaders  against  the  nomina- 
tion boroughs,  produced  the  change  of  the  constitutiou." 

The  distresses  of  the  people  had  fancd  to  a  flame 
every  smouldering  spark  of  dissatisfaction.  Violent 
political  agitation  for  a  repeal  of  the  union  distracted 
the  country,  A  universal  clamor  for  reform  and  a 
change  of  constitution  was  carried  successfully.  Var- 
ious acts  looking  to  a  remedy  for  existing  evils  had  been 
enacted  by  Parliament ;  but  all  to  little  purpose.  Dis- 
tress still  scourged  the  country.  On  the  21st  of  March, 
1833,  Mr.  Attwood,  who  had  been  an  active  member  of 
the  Political  Union  and  a  strenuous  supporter  of  the  re- 
form bill,  in  a  speech  before  Parliament  portraying  the 
existing  wretchedness,  incidentally  admitted  the  futility 
of  the  acts  which  had  been  passed  to  bring  relief.  He 
said ; 

"  What  is  the  good  of  having  a  reformed  Parliament  if  they  do 
not  apply  a  remedy  to  the  existing  distress?  And  what  will  people 
think  of  a  Reformed  Parliament  having  sat  so  many  weeks  without 
attempting  any  one  measure  in  behalf  of  the  distressed.  Distress, 
general,  extreme,  unnatural,  is  greater  than  in  any  former  period  of 
our  history. 

"  In  agriculture,  one-half  have  more  labor  than  they  can  bear, 
while  the  other  half  have  nothing  to  do;  and  yet  the  laborer  can  pro- 
duce four  times  more  than  is  required  for  the  support  of  himself  and 
family.  In  manufactures  the  proportion  of  the  produce  to  ihe  wants 
of  the  laborer  is  S'ill  greater,  but  matters,  instead  of  getting  better, 
are  daily  getting  worse.  Labor  Is  badly  i)aid;  manufactures  scarce- 
ly carried  on  with  any  protit — in  some  with  a  loss ;  commerce  is  de- 
clining in  the  same  proportion;  and  such  Is  the  distress  of  the  ship- 
ping interest  that  two-thirds  of  the  shipping  in  the  Thames  is  under 
mortgage,  which  is  not  fore-dosed  only  because  it  is  not  considered 
worth  the  redemption.  The  poor-rates  have  doubled  in  real  weight, 
from  the  price  of  the  produce  from  which  they  are  paid  having  been 
halved.  There  are  100,000  men  walking  about  London  in  search  of 
employment.  In  many  parts  of  the  country,  able-bodied  men  are 
working  night  and  day  for  8s.  or  7s.6d.  a  week,  and  often  can  earn  no 


260  OUTLINE    OF    ENGLISH   HISTORY: 

more  than  4s.  England  may  be  divided  into  two  classes,  the  dis- 
tressed and  the  atliuent.  In  the  fir.st  class  are  included  the  whole 
laud  holders,  in  the  last  the  bond  and  fund  holders.  The  former  are 
depressed  by  charges  on  their  estates  which  were  to  be  paid  in  a 
currency  50  per  ceut.  dearer  than  that  in  which  they  were  contrac- 
ted; the  latter  are  enriched  by  receiving  £90  in  gold  for  their  £G0. 
The  land-holders,  in  these  circumstances  cannot  contribute  to  war, 
and  the  fund-holders  will  not,  because  it  will  reduce  their  £90  back 
to  £G0.  Thus  we  do  not  venture  to  take  a  decided  part  in  foreign 
transactions  and  surrender  Antwerp  to  France,  and  Constantinople 
to  Russia  rather  than  endanger  the  ill-gotten  gains  of  the  class  whom 
it  had  been  our  sole  object  to  enrich.  The  result  of  the  distress  is 
an  enormous  increase  of  crime.  These  deplorable  effects  are  all 
owing  to  the  alteration  made  on  the  currency,  which,  it  had  been 
said,  would  only  alter  prices  4  per  cent.,  but  had  in  reality  towered 
them  100  per  cent,  and  in  the  same  proportion  reduced  the  gains  of 
the  producing  classes." 

The  effect  upon  pnces  produced  by  the  monetary 
system  adopted  by  Enghmd  in  1819,  and  pursued  to 
1833,  was  clearly  demonstrated  by  Mr.  Waithman,  from 
the  Parliamentary  returns.  The  values  of  exported 
and  imported  articles  were  determined  by  a  schedule  of 
prices  adopted  by  the  government  in  1697.  Hence,  the 
official  values  of  exports  and  imports  do  not  show  the 
money  or  commercial  values  of  them.  Mr.  Waithman 
demonstrated  that  from  1814  to  1820,  though  the 
greater  portion  of  this  time  were  years  of  distress,  the 
excess  of  real  or  money  value  over  official  value  in  ex- 
ports was  £41,000,000,  or  an  average  of  £5,857,142 
per  annum,  while  for  the  eight  years,  from  1821  to 
1828,  the  excess  of  the  official  over  the  real  or  money 
value  of  exiDorts,  was  £80,000,000,  or  £10,000,000  per 

annum. 

"  Whoever  considers  this  immense  depreciation  and  the  effects  it 
must  have  had  on  industry  of  every  description,  while  taxes,  bonds, 
bills  and  money  debts  of  every  description  remained  the  same,  will 
have  no  difficulty  in  discerning  what  it  was  that  uprooted  the  attach- 
ment to  old  institutions," 

and  produced  the  distress  referred  to  from    1819   to 
1833. 

There  is  a  coincidence  between  the  large  volume  of 


FINANCIAL,  CO^LMERCIAL    AND    DOMESTIC.  267 

currency  of  certain  periods  reported  in  the  foregoing 
table,  and  the  peace   and  prosperity  of  the   country 
during  the  same  period,  no  less  remarkable  than  the 
coincidence  between  the  small  volume  of  currency  and 
the  depres^on  of  business   and  disturbances  of  other 
periods.     For  instance,  in  1814  the  volume  of  currency 
Avas    £47,500,000,  and    in   1815   it  Avas  £4(5,272,000. 
Those  were  remarkably  prosperous  years,  while   1816 
and  1817  were  years  of  great  depression,  and  the  cur- 
rency amounted  to  only  £42,000,000  in  the  former,  and 
£43,294,000  in  the  latter  year.     In  1818,  a  year  of 
peace  and  prosperity,  the  currency  was  £48,278,000, 
while  in  1819,  a  year  of  very  great  distress,  riots  and 
disturbances,  the  currency  was  reduced  to  £40,738,- 
000,  and  it  continued  to  decline  in  volume  during  the 
distressing  years  of  1820,  1821  and  1822,  until  in  the 
latter  year  it  fell  to  the  low  point  of   £26,588,000. 
From  this  point"  it  began  to  expand  again,  followed  by 
corresponding  imi)rovement  in  i)eace  and  prosperity,  to 
£28,000,000  in  1823;  £32,759,000  in  1824  and  £41,- 
000,000  in  the   first  half  of  1825,  when  it  rapidly  fell 
to  £31,000,000   on  the  5th  of  December,  when  there 
"was  a  great  crisis  ;  from  Avhieh   it  again  expanded  to 
£40,000,000  on  the  25th  day  of  December,  tlie   same 
year,  stopping  the  panic.     It  again  fell  to  £30,219,- 
000  the  next  year  and  continued  to  lessen  in  volume 
followed  b}^  a  corresponding  increase  of  suffering,  riots, 
strikes  and  desperate  deeds,  until  the  latter  part  of 
1833,  when  a  slight  expansion  set  in,  followed  by  ap- 
pearances  of   returning  peace   and   prosperity.      The 
reports  of  exports  and  inqjorts  exhibit  nothing  upon 
which  the  disasters  referred  to  could  rest.     On  the 
contrary,  they,  taken  alone,  exhibit  evidences  of  pros- 


268  OUTLINE    OF   ENGLISH   HISTORY  : 

perily  during  the  periods  of  the  most  appalling  wretch- 
edness. It  was  argued  that  the  corn  laws,  protective 
tariff,  free  trade,  extravagance  of  government,  war, 
peace,  whig  administration  and  tory  administrations, 
abundant  harvests,  failure  of  crops,  speculation,  debts, 
want  of  credit  —  in  fact,  every  immaginable  thing,  was 
the  cause  or  were  the  causes  of  the  disasters  of  Eng- 
land from  1819  to  1833.  All  these  things,  doubtless, 
had  more  or  less  effect  upon  the  state  of  the  country. 
But  that  neither  one  nor  all  of  them  brought  the 
distress  narrated  is  evident,  for  three  insurmountable 
reasons. 

1st.  We  find  that  every  one  of  the  foregoing  alleged 
causes  existed  during  two  exactly  opposite  conditions 
of  the  country.  They  existed  in  "flush  times"  and 
in  "tight  times."  2d.  They  are  not  of  a  financial 
nature,  nor  did  they  affect  all  branches  of  business, 
nor  were  their  effects  alike  upon  all  branches  of  busi- 
ness. 3d.  But,  whether  there  M^as  war  or  peace,  pro- 
tective tariff  or  free  trade,  corn  laws  or  anti-corn  laws, 
abundance  or  scarcity  of  gold,  abundant  harvest  or 
failure  of  crops,  whig  administation  or  tory,  high  taxes 
or  low,  little  credit  or  much,  the  old  constitution  or  the 
new  ;  it  mattered  not  what  existed,  the  absolute  and  dis- 
tinct element,  money,  under  all  circumstances,  secretly, 
but  powerfully  operating,  produced  one  or  the  other  of 
two  clearly  defined  universal  effects  upon  society,  result- 
ing from  one  or  the  other  of  its  (money's)  states.  That 
is,  whenever  money  was  plentiful,  there  was  internal 
peace  and  prosperity,  and  when  scarce,  depression  and 
commotion.  We  therefore  conclude,  that  the  greatest' 
factor,  if  not  the  sole  one,  which  caused  the  wretched- 


FINANCIAL,  COMiEERCIAL   AND    DOMESTIC.  269 

ness  of  Great  Britain  from  181 G  to  1833,  was  the 
mutations  and  contractions  of  the  currency. 

The  Remedy. — The  charter  of  the  Bank  of  England 
was  renewed  in  1833  for  21  years,  making  the  issue 
thereof  a  legal  tender.  The  Ivf^al  tender  character  of 
the  notes,  thus  enacted,  enabled  that  bank  to  expand 
its  issues  with  safety  whenever  there  was  no  great  de- 
mand for  gold  to  ship  abroad,  and  gave  the  people  a 
money  which  answered  all  the  purposes  of  gold  for  in- 
ternal commerce.  The  effects  of  this  act,  thouirh  slow 
at  first,  began  to  be  felt  very  soon.  The  volume  of 
currency  was  increased  £1,000,000  in  1833,  and  the 
commercial  interests,  always  the  first  to  be  affected,  at 
once  began  to  be  materially  improved.  The  next  year 
the  currency  was  expanded  £3,000,000  more,  and  con- 
tinued to  so  expand  until  in  1836  it  amounted  to  £36,- 
200,000.  The  prosperity  and  internal  peace  and  hap- 
piness of  the  country  were  entirely  restored  and  so 
continued  until  another  contraction  of  the  currency 
occurred. 

By  a  critical  examination  of  statistical  reports  and 
history,  it  will  be  found  that  a  fall  of  prices  of  prop- 
erty, stocks  and  bonds,  an  increase  of  crime,  pauper- 
ism, mortality  rates,  emigration,  internal  commotion, 
riots,  strikes,  and  agrarianism,  and  a  decrease  of  the 
revenue  receipts  of  the  government  followed  right  upon 
the  heels  of  contractions  of  the  currency.  The  fore- 
going historic  facts  and  the  following  tables,  compared 
with  the  foregoing  tables  of  currency,  verify  the  prop- 
osition : 


270 


OUTLINE    OF    ENGLISH    HISTORY  : 


Tear.                 Emigration.  Mortality.           Pauperism.                Crime. 

1820 18.984 -6 23.277 

1821 13.194 o 1  to  1,500 

1822 12.349....,...!  to  41 .w'S 

1823 8.8G0 1  to  33| -  o 1  to  1,3GS 

1824 8  210 1  to  34 -^tl 1  to  1,361 

182.-) 14.891 1  to  33 «^ ..-1  to  1,037 

1826 20.900 1  to  37 gg 1  to   90» 


fl.2 


1827 28.003 1  to  34 St! 

1828 26  092  1  to  30 

1829 31.198 1  to  34 

1833 56.907 1  to  37 ... . 

1831 

1832 103.140 1  to  20* 

1833 62.684 1  to  32 . 


.  O)  g 

.  ^  .22 
88.160 1  to  30 ^^ 1  to 


P.' 


.1  to  1,041 
873 
790 
719 
84S 
768 
63^ 


1  to 
.1  to 
.1  to 


to 

to 


Tear  Revenue  in  round  numbers 

1815 £79,000,000 

1816   67,000,000 

1817 68  000,000 

1818 58  000,000 

1819 56,000. 000 

1820 57,000,000 

1821 .''8,000,000 

1822 60,00    000 

1823 57,000  000 


Year.         Revenue  in  round  numbers 

1824 £59,000,000 

1825 56,000,000 

1826 54,000,000 

1827 54  000,000 

1828 55,000,000 

1829 50,000,000 

1830 .50,000,000 

1831 46,000,000 

1832 46,000,000 


The  Banking  System  of  England. — Excepting  the 
issuance  of  Treasury  bills  by  the  government  for  tem- 
porary purposes,  the  entire  paper  money  of  England  is 
issued  by  banks.  The  oldest,  the  parent  bank,  is  the 
Bank  of  England,  which  was  chartered  in  1694,  with  a 
capital  of  £1,200,000,  and  was  required  to  loan  the 
government  the  same  amount  on  government  securities. 
The  bank  charter  has  been  renewed  a  number  of  times, 
with  slight  changes,  until  in  1816,  its  capital  stock  in 
public  securities  reached  £14,000,000,  upon  which  it 
always  has  been  and  is  yet  permitted  to  issue  an  amount 
of  notes  equal  to  the  amount  of  capital  in  public  securi- 
ties prescribed  for  it  by  law.  From  its  organization  up 
to  1844,  its  custom  had  been  to  issue  about  £3  in  notes 
for  every  £1  in  coin  in  its  vaults  in  addition  to  its  is- 
sues on  public  securities.      Its  notes  were  always  re- 


•Cholera. 


FINANCIAL,  COMJIERCIAL    AND    DOMESTIC.  271 

deemable  in  coin  when  presented  at  the  bark,  except 
during  suspension  of  cash  payments  provided  for  by 
law  from  1797  to  1823,  and  excepting  also,  the  time 
of  suspension  of  cash  pa^^ments  ni  1847, 1857  and  1866. 
Its  notes  were,  by  hiw,  made  a  legal  tender  everywhere 
from  1797  to  1823,  and  everywhere  except  at  the  Bank, 
by  the  act  of  Parliament  of  1833,  The  country  bank 
notes  were  issuable  on  stocks  and  securities,  and  re- 
deemable in  coin  on  the  Bank  of  England  notes. 

While  the  Bank  of  England  might  issue  £14,000,000 
and  country  banks  their  entire  issues,  on  stocks,  bonds 
and  securities,  yet,  excepting  the  periods  when  the  law 
suspended  cash  payments,  country  bank  notes  being  re- 
deemable in  Bank  of  England  notes  or  coin,  and  Bank 
of  England  notes,  the  whole  issue,  redeemable  in  coin 
whenever  they  were  presented  at  the  Bank,  the  whole 
banking  system  of  England  in  effect  rested  on  a  specie 
basis,  and  the  currency  was  and  is  yet  subject  to  all 
mutations  and  changes  resulting  from  the  migratory 
tendencies  and  ever  changing  volume  of  the  precious 
metals.  So  it  was  that  when  coin  or  bullion  was  plen- 
tiful in  England,  it  was  presented  at  the  bank  and  notes 
taken  for  it,  on  account  of  their  greater  convenience, 
and  thus  the  currency,  at  such  a  time,  expanded  when 
there  was  least  need  of  it,  resulting  in  abundance  of 
money  and  a  consequent  energizing  of  all  business  un- 
til the  country  was  in  the  delirium  of  great  prosperity, 
when,  unlooked  for,  a  sudden  contraction  of  the  cur- 
rency, the  effect  of  the  silent  unobserved  transition  of 
gold  from  the  country,  brought  an  appalling  and  disas- 
trous crisis  ;  and  the  bank  officers,  standing  amid  the 
wreck  and  ruin,  looking  to  the  redemption  of  their 
notes  and  their  depleted  coffers,  were  unable  to  avert 


272  OUTLINE    OF   ENGLISH   HISTORY. 

the  crisis  or  extend  help  when  the  country  needed  it 

most. 

''Unobserved  amidst  the  strife  of  parties,  unmarked  by  political 
leaders,  unknown  to  the  dominant  multitude,  one  cause  of  para- 
mount importance  and  irrisistible  force  was,  durinj;  the  forty  years' 
peace,  incessantly  acting  on  the  British  Empire.  The  mutations  of 
the  currency,  anticipated  before  1819,  experienced  since  that  period, 
furnishes  the  key  to  all  the  variations  in  social  happiness  which 
were  experienced  during  that  eventful  period.  They  explain  the 
alternations  of  feverish  and  short-lived  prosperity,  and  exhausting 
and  long  continued  distress,  which  invariably  occurred;  and  they 
account  for  the  vast  political  chantres  which  ensued,  and  the  en- 
tire alteration  in  the  balance  of  internal  power,  and  in  the  tendency 
of  foreign  and  commercial  policy  which  occurred  during  their  con- 
tinuance. Without  a  constant  reference  to  this  paramount,  irresist- 
ible cause,  all  attempts  to  explain  the  politics  of  Great  Britain 
during  this  long  period  will  prove  nugatory,  and  the  most  important 
lessons  to  be  derived  from  contemporary  history  will  be  lost,"— 
Alison. 

Such  is  a  brief  outline  of  the  domestic  and  business 
history  of  England.  The  years  1797,  1816,  1817, 
1819  to  1823,  1825,  1826,  1829  to  1833  have  recorded 
tales  of  woe  and  wretchedness  that  pierce  the  heart 
with  pity  and  make  one  wonder  that  the  suffering,  the 
distressed,  the  starving,  made  wretched  by  the  unwise 
policy  of  the  government,  did  not  rise  in  their  frenzy, 
lift  from  their  places  the  pillars  of  government,  and, 
like  Sampson  of  Isrsel,  bury  it  and  themselves  beneath 
the  ruins  wrought  by  their  own  hands. 


i^ 


CHAPTER  XVni. 


MONETARY    HISTORY    OF    THE    UNITED    STATES  : 
CRISES  TO  THE  CLOSE  OF  THE  REBELLION. 

We  do  not  discuss  the  finances  of  the  revolutionary 
period,  because  the  financial  measures  of  that  period 
were  peculiar,  unlike  anything  before  or  since  that  time. 
The  continental  currency  was  not  a  national  legal 
tender ;  the  adoption  of  pro-rata  portions  of  it  by  the 
States  made  it  a  local  currency ;  the  adversities,  ex- 
tremities and  fears  of  failure,  and  the  great  quantities 
of  it  destroyed  the  people's  confidence  m  it.  That 
these  facts  are  true  is  evidenced  by  the  fact  that  in 
1781  a  change  of  system  was  effected,  whereby  new 
notes  were  issued,  bearing  five  per  cent,  interest,  and 
redeemable  in  specie  in  six  years.  They  depreciated, 
as  the  old  ones,  and  no  considerable  quantity  of  them 
ever  got  into  circulation.  They  were  legal  tenders, 
bearing  interest,  and  redeemable  in  coin,  yet  they  were 
almost  worthless.  It  was  want  of  faith  in  the  srovern- 
ment — not  in  the  kind  of  money — that  destroyed  the 
value  of  both  kinds  of  money. 

The  contractions  of  the  currency  which  occurred  prior 
to  the  passing  of  the  resumption  act,  and  that  result- 
ing from  that  act,  have  produced  the  same  general 
effects  upon  the  country,  with  the  exception  that  some- 


274       MONETARY  HISTORY  OF  THE  UNITED  STATES  : 

times  an  extension  of  credit,  and  at  other  times  a  des- 
truction of  it,  have  followed  contraction. 

Forced  resumption  means  contraction,  and  contrac- 
tion, no  matter  by  what  means  effected,  produces  the 
same  general  results,  with  the  exceptions  named.  The 
resumption  act  is  in  its  material  effects  upon  the  country 
but  a  continuation  of  the  process  of  contraction,  insti- 
tuted by  the  government  in  1866-67.  Hence,  we  have 
considered  the  effects  of  contraction  prior  and  subse- 
quent to  the  passage  of  the  resumption  act  together, 
beginning  with  the  early  financial  history  of  the 
country,  and  dividmg  the  account  into  two  chapters, 
at  the  year  1866. 

After  the  close  of  the  last  war  with  Eno-land,  the 
United  States,  possessed  of  territory  nearly  as  large 
as  Europe,  with  virgin  soil  full  of  richness  and  prolific 
in  productions,  watered  by  innumerable  rivers,  the 
natural  commercial  highways  of  the  nation,  wanted  but 
two  things  to  make  it  the  richest  and  most  populous 
nation  on  the  globe.  These  were  men  and  money. 
They  were  indispensable  to  fell  the  forests,  till  the 
soil,  and  open  up  the  mineral  and  commercial  wealth. 
A  considerable  number  of  immigrants  from  Europe 
were  annually  swelling  the  population  and  adding  to 
the  productive  powers  of  the  country,  but  they  were 
soon  almost  lost  when  scattered  over  the  vast  districts 
of  country. 

The  demand  for  labor  was  great,  but  capital  to  open 
up  business  enterprises  was  scarce.  The  high  wages 
of  labor  of  workmen  presented  little  inducement  to 
European  capital.  The  world's  annual  production  of 
gold  and  silver  had  fallen  to  half  its  former  amount, 
on  account  of  the  South  American  revolution,  and  but 


CRISES  TO  THE  CLOSE  OF  THE  REBELLION.  275 

little  of  this  found  its  way  to  America.  Thus  it  was 
that  the  United  States,  possessed  of  as  much  natural 
wealth  as  ever  blessed  a  people,  was  without  the  means 
of  developing  it  and  might  have  remained  a  wilderness 
but  for  the  energizing  power  of  a  new  agency.  This 
was  paper  money.  To  this  the  achievement  of  their 
independence  is  attributable  as  much  as  to  all  things 
else,  save  their  patriotism  and  valor.  As  it  had  been 
with  Rome,  in  her  wars  with  Carthage,  and  with 
Great  Britain,  in  her  wars  with  Bonaparte,  so  it  was 
in  the  revolutionary  struggle  of  the  United  States  ; 
paper  money  was  the  sinnews  of  war.  It  proved  to 
be  of  equal  strength  in  peace.  Except  dunng  the 
depressing  effects  of  the  crises  of  1818,  1819-20, 
1837-8-9  and  1840,  and  the  later  ones,  the  advance- 
ment of  the  United  States  in  population,  wealth  and 
universal  prosperity  among  the  people  has  been  unex- 
ampled. The  demand  for  labor  has  been  unbounded, 
the  prices  of  all  property  have  generally  ranged  high  ; 
all  the  industries  have  increased  ;  commerce  has  multi- 
plied itself  many  times  ;  in  the  rural  districts  and  in 
the  towns  and  cities  the  cheerful  hum  of  successful 
business  life,  and  unmistakable  evidences  of  prosperitjs 
have  gladdened  the  hearts  of  the  people.  But  these 
cheering  conditions  were  changed  to  scenes  of  depres- 
sion, bankruptcy  and  general  distress  during  money 
crises. 

One  of  these  terrible  crises  came  in  1818-19-20. 
The  charter  of  the  iirst  U.  S.  bank  expired  in  1811. 
From  that  time  until  1817  the  currency  was  supplied 
by  state  banks.  The  immunity  from  redemption  of 
their  issues,  resulting  from  the  suspension  of  specie 
payments  in   1814,  caused  a  great  exT[3ansiou  of    the 


27Q      MONETARY  HISTORY  Oi   THE  UNITED  STATES  : 

currency  by  the  state  banks.  It  rose  from  about  $33,- 
000,000  m  1811  to  $110,000,000  in  1815.  In  1817  the 
second  bank  of  the  United  States  having  been  chartered 
in  1816,  went  into  operation.  The  removal  of  all  gov- 
ernment funds  from  state  banks  to  the  Bank  of  the 
United  States  and  a  return  to  resumption  of  specie  pay- 
ments produced  an  enormous  contraction  of  the  cur- 
rency. From  $110,000,000  in  1815  it  fell  to  $45,000,- 
000  in  1819,  when  there  was  a  general  crash  and  a  des- 
truction of  credit.  An  iimnense  number  of  bank  and 
other  failures  ensued.  It  was  estimated  that  two-thirds 
of  all  the  traders  in  the  United  States  failed.  Lands 
and  agricultural  products  fell  to  one-half  of  what  they 
readily  commanded  in  1808-10,  and  great  distress  and 
suffering  fell  upon  the  people.  Between  1811  and  1820 
no  less  than  165  banks,  in  different  parts  of  the  Union, 
either  became  bankrupt  or  withdrew  from  business. 
During  this  period  of  return  to  cash  payments,  industry 
was  essentially  blighted ;  suffering  was  universal,  and 
the  people,  glad  as  usual  to  fix  the  responsibility  of 
misfortune  on  anyone  but  themselves,  generally  ascribed 
it  to  the  banking  system,  which,  though  grieviously 
abused,  had  been  the  mainspring  of  their  progress,  and 
the  principal  cause  of  their  prosperity. 

So  terrible  was  the  prostration  that  the  Pennsylvania 
Senate  appointed  a  committee  to  report  on  the  subject. 
On  the  20th  of  February,  1820,  they  reported  this  as 

the  condition  of  affairs  : 

"I.  Ruinous  sacrifices  of  landed  property  at  sheriff's  sales, 
whereby  iu  many  cases  lands  and  houses  have  been  sold  at  less  than 
a  half,  a  thiid,  or  a  fourth  of  their  former  values,  thereby  depriving 
of  their  homes  and  of  the  fruits  of  laborious  years  a  vast  number 
of  our  industrious  farmers,  some  of  whom  have  been  driven  to  seek 
in  the  uncultivated  forests  of  the  west  that  shelter  of  which  they 
have  been  deprived  in  their  native  State. 

«'II.  Forced  sales  of  merchandise,  household  goods,  farming  stock 


CRISES  TO  TITE  CLOSE  OF  THE    REBELLION.  277 

aud  utensils,  at  prices  far  bolow  the  cost  of  production,  whereby 
many  families  have  been  deprived  of  the  cominou  necessities  of  life, 
and  of  the  implements  of  tlieir  trade. 

"III.  Numerous  bankruptcies  and  pecuniary  embarrassments  of 
every  description,  as  well  among  the  agricultural  and  manufacturing 
as  the  mercantile  classes. 

"IV.  A  general  scarcity  of  money  throughout  the  country,  which 
render;  it  almost  impossible  for  the  husbandman  or  the  owners  of 
real  estate  to  borrow  at  a  usurous  interest,  and  where  landed  secur- 
ity of  the  most  indubit;ible  character  is  offered  as  a  pledge.  A 
singular  dilKculty  of  procuring  on  loan  had  existed  in  the  metropolis, 
previous  to  October  last,  but  since  then  been  partially  removed. 

"V.  A  general  suspension  of  labor,  the  only  legitimate  source  of 
"Wealth,  in  our  cities  aud  towns,  by  which  thousands  of  our  most 
useful  citizens  are  rendered  destitute  of  the  means  of  support,  and 
are  reduced  to  the  extremity  of  poverty  aud  despair. 

"VI.  Numerous  hiwsuits  upon  the  dockets  of  our  courts  and  of 
our  justices  of  the  peace,  which  lead  to  extravagant  costs  and  loss 
of  a  great  portion  of  valuable  time. 

"VII.  A  general  inability  in  a  community  to  meet  with  punctuality 
the  payments  of  debts,  even  for  family  expenses,  which  is  experienced 
as  well  by  those  who  are  wealthy  in  property,  as  by  those  who  have 
hitherto  relied  upou  their  current  euiragements.  With  such  a  mass 
of  evils  to  oppress  them,  it  cannot  be  wondered  at  that  the  people 
should  be  dispirited,  and  that  they  should  look  to  their  representa- 
tives for  relief.  Their  patient  endurance  of  suffering,  wliich  can 
only  be  imagined  by  those  who  have  habitually  intermingled  with 
them  at  their  homes  and  by  the  firesides,  merits  the  commendation 
of  the  legislature  and  prefers  a  powerful  claim  to  their  interfernce." 

No  candid  mind  can  fail  to  see  that  a  return  to  specie 

payments   ruined  the   banks,  forced  them  to  greatly 

reduce  their    circulation,  and  this   contraction  of  the 

currency  caused  a  preci])itation  of  prices  down  one-half, 

brimjinsf  oreneral  distress  to  the  country.      If  inflation 

had  been  the  cause  of  the  crisis,  it  would  have  come  in 

1815,  according  to  the  arguments  of  bullionists.    They 

claim  that  the  crisis  is  reached  at  the  highest  point  of 

inflation.     Secretary  Sherman  affirms  that  inflation  of 

paper  money  and  credit  causes  crises.    Who  ever  heard 

of  a  financial  failure  because  of  too  much  money  ?  "Who 

ever  heard  of  the  financial  ruin  of  a  debtor  so  lonij  as  he 

could  command  ample  credit  ?     With  all  due  respect  to 

the  opinions  of  that  high  functionary,  we  must  say  that 

the  theory  of  the  Secretary  of  the  Treasury  is  radically 


278       MONETAEY  HISTORY  OF  THE  UNITED  STATES  : 

wrong.  Crises  are  caused  by  a  contraction  of  the  vol- 
ume of  the  money  or  credit,  or  both.  After  the  Bank 
of  the  U.  S.  got  into  full  operation,  with  general  confi- 
dence in  it  and  its  paper,  together  with  an  increase  of 
the  stock  of  specie  in  the  country  of  about  $1,000,000, 
and  a  slight  enlargement  of  the  volume  of  paper  cur- 
rency, confidence  was  measurably  restored  and  prom- 
ises of  better  times  began  to  return  ;  in  1820  and  from 
1821  on  to  1837  an  era  of  prosperity  blessed  the  coun- 
try. Below  is  a  table  of  the  amount  of  specie  held  by 
banks,  and  the  circulation  of  all  the  banks  in  the  U.  S. 
on  the  1st  of  January  for  the  years  named  : 


Year 

Circulation 

Specie 

Year 

Circulation 

Specie 

1811. 

..$  33  500,000..$ 

21,200,000 

1841. 

8110,000,000. 

.§  34  813,958 

1815. 

.    110  100,100.. 

17,000  000 

1842. 

83,734,011. 

.      28,440  423 

1819. 

.      4', 000, 000.. 

not  kuown 

1843. 

.      58.563,608. 

.      33,515,806 

1820. 

.      48,452,825.. 

23,212.995 

1844. 

75,167,646. 

.      49,898,269 

1830. 

.      74,248,043.. 

29,722,993 

1845. 

.      89,608,711. 

.      44,241,242 

1834. 

.    114,047,949.. 

not  known 

1846. 

.    105  552,427. 

.      42,012,095 

1835. 

.    121,032,292.. 

59,645,994 

1847. 

.    108,519  766. 

.      35,132  516 

1836. 

.    163,376,460.. 

48,437,582 

1848. 

.    128,506  091. 

.      46,369,765 

1837. 

.    122,906,977.. 

40,553,789 

1849. 

.    114  743,415. 

.      43,619  368 

1838. 

.    160,633,858.. 

38,954,954 

1850. 

.    131  366.526. 

.      4 --.,379,345 

1839. 

.    141,153.616.. 

49,286,280 

1851. 

.    155,565,251. 

.      48,671,048 

1840. 

.    113,664,433.. 

34,574,829 

Another  of  these  reverses  besran  to  be  felt  in  the  lat 


fc' 


ter  part  of  183G,  and  settled  with  terrible  effect  upon 
the  country  in  1837,  lingering  and  blighting  industry 
and  commerce  in  varying  degrees  until  1849.  Many 
now  living  remember  the  fluctuations  and  immense  fall 
of  prices  and  general  depression  of  business  that  af- 
fected the  country  during  that  period.  During  the 
first  three  years  of  the  crisis,  nearly  all  the  banks  in 
the  United  States  stopped  payment,  and  a  great  num- 
ber of  them  failed.  Almost  nine-tenths  of  the  com- 
mercial houses  became  bankrupt,  the  cotton  planters  of 
the  South  Mere  ruined,  and  the  commercial  wealth  of 
the  country  was  nearly  destroyed.  Debtors  were  ruined, 


CRISES  TO  THE  CLOSE  OF  THE    REBELLION.  279 

creditors  were  subjected  to  imaiense  losses.  Every- 
where, in  every  nook  and  corner  of  the  republic  where 
civilized  men  dwelt,  the  searching  hand  of  "hard  times" 
thrust  its  lean  and  bonv  finders  into  everv  household 
and  spared  neither  age  nor  condition  from  its  chilling, 
pinching,  distressing  grasp.  Between  1837  and  1849, 
there  were  short  seasons  of  apparant  return  of  prosper- 
ity, but  they  were  delusive  ;   exciting  hopes  only  to 

blast  them  aijain. 

"Althousrli  the  United  States  shared  to  a  certain  decree  in  the 
comiuercial  disasters  consequent  on  the  resumption  of  cash  pay- 
ments in  Great  Britain,  in  1819,  and  the  consequent  monetary  crises 
in  lt<25  and  1832,  yet  this  period  was,  upon  the  whole,  one  of  extra- 
ordinary and  unprecedented  prosperity  over  their  whole  extent. 
Prices  were  hiiih,  but  wages  were  still  higher;  ease  and  content- 
ment generally  prevailed;  cultivated  land  was  encroaching  at  the 
rate  of  seventeen  miles  a  year  over  a  frontier  seventeru  hundred 
miles  in  lenuth,  upon  the  gloom  of  the  forest;  and  the  seaport 
towns  on  the  coa'-t,  sharing  in  the  vast  commerce  which  such  a 
rapid  increase  required,  were  rapidly  advancing  in  wealth,  popula- 
tion and  enterprise  During  these  iifteen  years  the  population  of 
the  United  States  advanced  65  per  cent.;  its  exports  and  imports 
doubled,  and  a  vast  stream  of  emigrants  from  the  British  Isles, 
which  had  come  at  last  to  be  above  50,000  a  year,  added  to  the  pro- 
lific power  in  providing  hands  to  keep  pace  with  this  immense  in- 
crease It  is  to  the  influence  of  the  American  banks,  in  furnishing 
the  means  of  cultivation  and  improvement  to  the  hardy  settlers  in 
the  forest,  that  the  superior  aspect  of  the  American  side  of  the  St. 
Lawrence  to  the  British,  which  has  attracted  the  notice  of  every 
traveler,  is  mainly  to  be  ascribed 

"The  charter  of  the  United  States  Bank  being  only  for  twenty 
years  from  1816,  the  Pirectors  of  the  establishment  under  the  direc- 
tion of  their  able  chairman,  Mr.  Biddle,  brought  forward  a  bill  in 
1832  to  authorize  the  renewal  of  the  charter  for  the  like  term  of 
years.  This  was  the  signal  for  the  deadly  strife  which  ensued. 
'v\  ar  to  the  knife  was  immediately  proclaimed  by  the  whole  Demo- 
cratic party  of  the  Union  against  the  United  States  Bank.  Both 
Houses  of  Congress  passed  tiie  bill  renewing  the  charter  of  the 
United  States  Bank  by  considerable  majorities.  But  the  Demo- 
cratic party  were  not  discouraged.  Secure  of  the  concurrence  of 
General  Jackson,  the  President,  they  raised  such  a  clamor  against 
the  Hank  in  the  newspapers,  that  he  was  induced  to  oppose  the  veto, 
which  the  Constitutinn  intrusted  to  him,  to  the  bill.  Not  content 
with  putting  a  negative  on  the  act  passed  by  Congress  renewing 
the  B  nk  cliarter.  General  Jackson,  in  the  succeeding  year,  went  a 
step  further,  and  withdrew  the  whole  public  deposits  from  the 
United  States  Bank  and  its  branches,  and  handed  them  over  to  the 
local  banks. 


280       MONETARY  HISTORY  OF  THE  UNITED  STATES 


"The  states  in  the  valley  of  the  Mississippi,  encouraged  by  the 
support  of  government,  and  strong  in  the  possession,  through  their 
banks,  of  the  public  deposits,  rushed,  as  it  were,  with  inconsiderate 
fury  into  the  void  created  by  the  contraction  of  the  business 
of  the  United  States  Bank,  which-  had  been  conducted  with 
comparative  prudence.  It  was  soon  seen  what  free  trade  in  banking 
will  speedily  become.  The  President  had  sought  to  destroy  one 
bank  of  which  he  was  jealous ;  he  did  so ;  but  in  so  doing  lie  reared 
up  a  hundred.  The  effects  of  this  state  of  things  was  to  the  very 
last  degree  disastrous  in  every  part  of  the  United  States.  The 
whole  bullion  of  the  country  was  withdrawn  from  the  commercial 
cities  on  the  coast,  where  it  was  essential  to  support  the  banks  and 
regulate  the  exchanges,  and  thrown,  as  government  deposits, 
to  stagnate  unemployed  in  the  vaults  of  remote  provincial  banks. 
The  gold  and  silver  so  abstracted  from  the  great  commercial  cities 
found  no  channel  for  return ;  for  when  the  Western  banks  began  to- 
restrict  their  loans,  the  merchants  in  those  parts  were  deprived  of 
the  means  of  making  remittances,  and  the  proceeds  of  the  goods  re- 
mitted to  them  having  been  for  the  most  part  invested  in  the  pur- 
chase of  land,  were  now  locked  up  in  the  banks  to  meet  the  Treas- 
ury orders.  Thus  credit  was  dc'stroyed.  and  transactions  of  all 
sorts  were  stopped  alike  in  the  cities  on  the  coast  and  the  forests 
in  the  interior.  The  banks,  compelled  to  pay  in  specie  by  the  ex- 
isting law,  could  get  none,  and  their  only  resource  was  sternly  to 
refuse  accommodation  even  to  houses  of  the  first  respectability. 
Terror  and  distrust  universally  prevailed;  the  machine  of  society, 
like  a  huge  mill  turned  by  water  which  was  suddenly  fi'ozen,  came 
to  a  stand.  General  Jackson  retired  from  office,  having  served  his 
time  in  March,  1837,  and  was  succeeded  by  Mr.  VanBuren. 

"The  catastrophe  was  for  a  short  period  kept  off  by  the  expedient 
adopted  by  the  chief  merchants  and  bankers  in  New  York  and  Phila- 
delphia, of  drawing  bills  at  twelve  months  on  certain  great  houses  in 
London  and  Liverpool,  which  accepted  them,  and  on  which  cash 
was  paid  in  the  mean  time.  But  this  expedient  only  postponed,  it 
did  not  avert,  the  disaster;  England  itself  was  involved  in  the  conse- 
quences of  the  crusade  against  paper  raised  in  the  United  States;  the 
acceptors  for  the  most  part  failed  before  the  bills  became  due ;  and 
the  crash  set  in  with  unexampled  severity,  in  March,  1837.  It  first 
began  in  New  Orleans,  in  consequence  of  the  great  transactions  in 
cotton  of  that  place  with  Great  Britian,  but  rapidly  spread  to  New 
York,  Philadelphia,  and  other  cities  on  the  coast,  and  the  scene  of 
confusion  and  panic  which  ensued  baffles  all  description.  A  utiiver- 
sal  run  took  place  upon  the  banks,  which  being  in  a  great  degree  un- 
provided with  cash,  in  consequence  of  its  having  been  drained  away 
to  the  banks  in  the  West,  were  unable  to  meet  the  demand  for 
specie.  They  all,  including  the  United  States  Bank,  accordingly 
soon  suspended  cash  payments,  and  upon  this  the  panic  became  uni- 
versal and  the  crash  as  widespread.  Deprived  of  the  wonted  re- 
source of  discounted  bills  to  meet  their  engagements,  the  greatest 
as  well  as  the  smallest  houses  in  the  commercial  cities  becaine 
bankrupt.  Two  hundred  and  fifty  houses  stopped  payment  in  New 
York  in  the  first  three  weeks  ot  April;  and  in  Boston,  Philadelphia, 
Baltimore,  and  other  cities,  the  devastation  was  not  less  universal. 
Cotton  fell  from  Ud,  the  pound,  in  1835,  to  7>^'d  ,  and  all  other  ar- 


CRISES  TO  THE  CLOSE  OF  THE  REBELLION.  281 

tides  of  export  in  a  similar  proportion.  Soon  the  distress  spread 
like  a  pestilence  tlirough  tlie  various  raraificiitions  of  society.  Pub- 
lic works  railways,  canals  were  brousrht  to  a  stand;  tlie  shipwright 
and  builder  dismissed  their  men,  tlie  manufacturer  closed  liis 
doors ;  one  sentiment  pervaded  all  classes — the  anticipation  of  uni- 
versal ruin  and  indivi(hial  beggary. 

"  The  merchants  of  New  York  presented  a  petition  to  the  Presi- 
dent, praying  him  to  retract  I  is  steps,  relax  the  laws  as  to  the  pay- 
ment of  the  price  of  lands  sold,  and  convoke  Congress  to  consider 
what  means  could  be  devised  to  alleviate  the  public  distress.  They 
met  only  with  a  stern  refusal.  The  calamities  which  prevailed 
were  ascribed  entirely  to  the  mania  of  speculation  and  over-trading; 
the  'mercantile  ari-tocracy'  were  signalized  as  the  authors  of  all  the 
public  misfortunes;  and  the  deposit  banks  were  charged  with  'base 
treacliery  and  perfidy  unparalelled  in  the  history  of  tlie  world,  all 
purely  with  the  view  of  gratifying  Biddle  and  Barings.'  At  the 
same  time  to  evince  his  determination  to  persist  in  the  course  of  his 
predecessor,  Van  Burcn  issued  a  circular  to  the  different  collectors 
of  the  revenue  in  the  United  States  to  receive  nothing  but  specie,  or 
notes  of  banks  still  paying  in  specie,  in  payment  of  revenue  bonds  or 
debts  due  the  gtates.  But  it  was  easier  to  issue  such  a  circular  than 
give  the  means  of  complying  with  it;  and  the  public  revenue,  entirely 
dependent  on  the  Custom  House  duties  and  the  sales  of  public  lands, 
almost  entirely  disappeared.  Within  six  months  after  the  general 
suspension  of  cash  payments,  it  was  found  that  not  more  than  five 
per  cent  of  the  sum  due  on  tlie  public  debts  had  been  paid  to  the 
collectors;  the  government,  without  a  revenue,  were  compelled  to 
bring  in  a  bill  authorizing  them  to  appropriate  S9, 367, 214  lying  in 
the  Treasurv — which,  under  the  existing  laws  of  the  23rd  of  June, 
1836  sliould  have  been  distributed  among  the  States — and  give  them 
Treasury  bonds  instead. 

"  So  utterly  was  the  government  bereaved  of  money,  that  they 
were  reduced  to  tlie  necessity  of  issuing  Treasury  Bills  to  the  amount 
of  $10,000,000  more,  which  was  justified  to  the  public  upon  the  hu- 
milating  confession  that  above  $28,000,000  were  due  to  government 
by  State  banks  of  deposit,  and  $15,000  000  by  private  banks  and  in- 
dividual-!, and  that  it  could  recover  no  part  of  these  sums ;  a  state  of 
things,  it  is  believed,  unparalelled  in  any  other  age  or  country. 

"  Such  was  the  scarcity  of  specie,  in  consequence  of  its  being 
locked  up  in  Western  banks,  that  the  banks  on  the  coast  were  com- 
pelled to  apply  to  England  for  assistance  before  they  could  resume 
cash  payments ;  and  l\w.  Bank  of  England, with  praiseworthy  liberality, 
in  April,  1838,  remitted  the  United  States  Bank  £1,000,000  in  specie. 
This  enabled  them  to  resume  payment  in  specie  and  recommence  op- 
erations on  a  large  scale,  whicti  soon  restored  credit,  as  all  the  other 
banks  did  the  same.  Tlieir  efforts  were  immediately  directed  to  ar- 
rest tiie  fall  in  prices  of  cotton,  the  great  article  of  commercial  ex- 
port, which  had  fallen  to  4d.  a  pound,  being  not  a  third  of  what  it 
had  been  three  years  befoi-e,  and  that  although  the  last  crop  had  been 
deficient  rather  than  the  reverse.  For  this  purpose  they  made  im- 
mense advances  on  long-dated  bills  drawn  on  and  accepted  by  houses 
in  England  t-o  the  holders  of  cotton,  to  prevent  their  stock  being 
forced  into  English  markets  at  these  ruinously  low  prices.  This  op- 
eration, which  was  indispensable  to  arrest  the  ruin  of  the  country, 


282       MONETARY  HISTORY  OF  THE  UNITED  STATES  : 

succeeded  for  a  time,  and  prices  of  cotton  rose  considerably  in  the 
first  half  of  1839;  but,  unhappily,  the  crash  which  ensued  at  that 
time  in  England  utterly  destroyed  the  means  of  carrying  it  forward. 
The  Bank  of  England,  itself  nearly  as  hard  pressed  as  the  banks  of 
America,  was  obliged,  in  the  Autumn  of  183i),  rapidly  and  rigidly  to 
contract  its  advances;  the  houses  which  had  accepted  the  long-dated 
bills  became  bankrupt;  and  the  consequence  was,  that  the  crash 
came  on  again  in  America,  after  this  vain  attempt  to  arrest  it,  with 
more  severity  than  ever.  The  United  States  Bank  stopped  payment, 
finally  and  irrecoverably,  on  the  5Lh  of  October;  all  the  other  banks 
in  the  Southern  Stares  of  the  Union  suspended  cash  payments,  and 
before  the  end  of  the  year  nine-tenihs  of  tlie  whole  commercial 
houses  in  America  were  bankrupt,  and  nearly  the  whole  commercial 
wealth  of  the  country  was  swept  away. 

"The  banks  were  ruined;  the  'commercial  arris tocracy, '  the  ob- 
ject of  so  much  jealously,  was  destroyed. 

•'  Immense  was  this  change  upon  the  government  and  policy  of 
America;  the  revolution  was  as  great  and  irremediable  as  that  of 
1789  had  been  in  France — that  of  1832  in  Great  Britian.  But  at  what 
price  was  this  victory  gained?  At  that  of  national  wealth,  the  na- 
tional happiness,  the  national  hcmor.  Foreign  commerce  was  almost 
destroyed;  that  with  England  was  reduced  to  a  little  more  than  a 
fourth  of  its  former  amount.  The  embarrassment  in  the  interior, 
from  the  failure  of  the  customs  and  the  diminished  sales  of  the  pub- 
lic lands,  became  so  great  that  payments  of  public  debts  was  impos- 
sible, since  no«legislator  had  ever  ventured,  for  general  and  national 
objects,  to  pronounce  the  words  direct  taxation.  Thence  the 
KEPUDiATiON  OF  STATE  DEBTS  became  general  in  the  United  States, 
and  has  affixed  a  lasting  and  inefTaceable  stain  on  the  national  lionor 
and  on  the  character  of  the  people  for  common  honesty.  " 

Wc  have  given  this  lengthy  extract  from  the  account 
of  our  crises  of  1837  and  1889,  by  Sir  A.  Alison,  of 
England,  because  he  was  one  of  the  most  critical  ob- 
servers of  the  financial  measures  of  nations  and  their 
operations  of  the  time  in  which  he  wrote. 

The  real  cause  of  the  distress  was  not,  however,  as 
Mr.  Alison  supposed,  the  destruction  of  the  United 
States  Bank,  and  the  transition  of  coin  from  the  banks 
of  the  East  to  those  of  the  West.  It  resulted  from  a 
great  contraction  of  the  currency,  and  the  contraction  of 
the  currency  resulted  from  an  insufficient  supply  of  the 
precious  metals  to  sustai-n  the  bank  issues. 

The  study  of  the  tabhi  of  money  given  a  few  pages 
back,  in  connection  with  the  history  of  the  correspond- 
ing times,  reveals  to  the  inquirer  the  causes  of  the  state 


CRISES  TO  THE  CLOSE  OF  THE    REBELLION.  283 

of  affair?  just  related.  It  will  be  observed  that  on  the 
1st  of  January,  1835,  the  total  paper  circulation  in  the 
United  States  was  $121,032,292,  and  the  amount  of 
coin  in  the  banks  was  $59,<U3,904.  The  banks  then 
banked  on  coin.  Their  issues  being  based  on  coin,  the 
volume  of  paper  money  was  increased  or  reduced,  as  a 
rule,  in  proi)ortion  to  the  increase  or  reduction  of  coin 
in  bank  vaults  and  in  the  countr^^  Operating  on  thus 
principle  we  tind  the  banks,  in  consequence  of  the  im- 
mense amount  of  coin  in  their  vaults  on  January  1st, 
1835,  enlarging  their  issues  until,  on  Januar}' ,  183G,  they 
rose  to  the  unprecedented  sum  of  $103,376,460.  On 
the  1st  of  January,  1836,  the  specie  in  banks  had  been  re- 
duced to  $48,437,582,  and  in  consequence  during  1836, 
the  bank  issues  were  reduced  so  that  on  1st  of  January, 
1837,  they  stood  at  $160,633,858,  and  specie  in  banks 
was  but  $40,553,789.  This  further  reduction  of  specie 
necessitated  a  further  contraction  of  the  currency  dur- 
ing the  year  1837,  so  that  it  fell  to  $122,906,977  on  the 
1st  of  January,  1838.  The  cause  of  this  drain  of  specie 
and  consequent  contraction  of  the  currency  is  visible  in 
the  reports  of  exports  and  imports  for  1835  and  1836. 
Following  is  a  table  of  exports  and  imports  for  the 
years  named,  and  the  balances  in  favor  of  and  against 

the    United    States  :  Bal.  in  favor    Bal.  against 

Year.                 Exports.  Imports.                         of  U.  S.               U.S. 

1S24 S7r),;t8G,(!57 .S8U,.j49,007 $5,502,350 

1825 99,535,3S8 1X5,340  075 §3,195  312 

1826 77.595,322....     84,974,477 7,379,155 

1827 821324,8(17 70  484,008 2,840,759 

1828 72,204,080.    ..     88,.^09,814 16,255,188 

1829 72.3r)8,071 74,492,527 2,133,856 

1830 73.844.508 70,870,929 2,972,,588   . . . 

1831 81,310  583 103,191124 21,880,541 

1832 87,170,943 101,929,200 13,842,323 

1833 90,140,433....    108,118,311 17.978,378 

1834 104,348  973 120,.n21,332 22  174,359 

1835 121,093,577....    149,895,749 28,202,172 

1836 128,603,040....   189,880,035 01,210,995 


284     MO^^:TARY  history  of  the  uxited  states  : 

It  will  be  seen  that,  from  1831  to  1835  inclusive,  bal- 
ances against  the  United  States  ranged  from  $13,842,- 
323  to  $28,202,172,  these  l)alances,  being  comparatively 
small,  were  either  carried  over  each  vear  to  the  next 
or  settled  in  coin. 

It  will  be  observed  that  in  1836  there  existed  aijamst 
the  United  States  the  immense  sum  of  $61,216,995 
foreign  balances.  This  necessitated  large  shipments 
of  coin  abroad,  reducing  the  stock  in  banks  from  $48,- 
437,582  to  $40,553, 789"on  the  1st  of  Jan.,  1837.  At 
the  latter  date  the  currency  stood  at  $160,633,858,  but 
a  rapid  contraction  set  in  which  reduced  it  to  only 
$122,906,977  on  the  1st  of  January,  1838.  In  the 
spring  of  1837  the  effect  of  this  rapid  contraction 
culminated  in  the  great  crisis  just  described.  This 
ruinous  crisis  which  scourged  the  countrv  for  three 
years,  and  left  its  blight  upon  it  until  1849,  has  been 
ascribed  to  various  causes. 

It  has  been  held  that  the  speculation  in  wild  lands  in 
the  Avest,  from  1830  onward,  caused  it.  That  the  veto 
bill  of  the  charter  of  the  Bank  of  the  United  States,  by 
Jackson,  and  the  removal  of  the  deposits  to  State  banks 
did  it.  That  the  spirit  of  speculation  and  increase  of 
debt,  caused  by  the  inflation  of  the  currency,  did  it. 
But  whoever  studies  history,  and  draws  such  conclu- 
sions from  it,  studies  to  little  purpose.  That  these 
facts  affected  the  country,  no  one  doubts.  But  to  say 
that  they  were  the  cause  of  the  universal  ruin  of  1837-39 
is  to  dignify  accidental,  irritating  circumstances,  and 
attrilnitc  to  them  the  character  and  power  of  general 
and  fundamental  causes. 

The  speculation  in  wild  lands  in  the  west  could  not 
have  seriously  affected  any,  except  those  who  sustained 


CRISES  TO  THE  CLOSE  OF  THE    REBELLION.  285 

loss  on  the  Lands.  The  veto  of  the  Bank  of  the 
United  States  und  tlie  removal  of  the  deposits,  simply 
transferred  the  money  power  from  one  bank  to  others  : 
it  did  not  produce  the  crisis.  If  it  be  said  that  the 
removal  of  the  government  deposits  to  the  State  banks 
caused  the  latter  to  inflate,  we  answer,  that  this  was 
a  circumstance  of  an  accidental  character,  and  the 
same  result  would  have  followed  an  accumulation  of 
treasure  in  State  bank  vaults,  obtained  from  any  other 
source.  If  it  be  said  that  inflation  caused  the  crisis, 
we  answer  that  the  cause  existed  in  the  kind,  not  in  the 
quantity  of  the  paper  money.  The  inflation  niflated 
€0171  values,  because  the  paper  was  redeemable  in 'coin. 
This  inflation  of  coin  values  induced  large  imports  for 
profit,  producing  a  foreign  balance  of  $G1,000,000 
against  the  United  States  in  183().  This,  in  turn, 
forced  a  large  amount  of  coin  out  of  the  country  to 
pay  it,  and  this  demand  for,  and  drain  of,  coin  depleted 
bank  reserves,  depreciated  their  notes,  necessitated  a 
rapid  contraction  of  the  currency,  producing  rapidly 
falling  prices  and  a  panic  and  universal  distress. 

It  has  been  said,  that  the  spirit  of  speculation  and 
increase  of  indebtedness,  produced  by  inflation,  caused 
the  crisis.  Such  has  been  the  broad  assertion  and  the 
cause  assigned  for  all  crises,  and  is  the  constant  staple 
of  a  certain  class  of  thinkers.  We  answer  that  they  take 
it  for  granted  that  inilation  caused  both  speculation 
and  an  increase  of  indebtedness.  But  if  such  were 
true,  if  there  had  been  no  contraction,  the  disasters 
would  have  been  confined  to  those  who  lost  on  specu- 
lation, and  those  who  went  in  debt  beyond  their  al)ility 
to  pay.  There  would  have  been  no  universal  fall  in 
prices,  no  suffering  of  laborers,  no  general  stagnation 


28 G     MONETARY    HISTORY    OF    THE    UNITED    STATES.* 

of  business,  no  universal  distress,  disaster  and  gloom, 
such  as  made  the  heavens  black,  and  swept  the  country 
with  commercial  and  financial  ruin. 

There  is  more  reason  for  attriljutino;  the  crisis  to  the 
jrreat  balances  of  trade  against  the  United  States  in 
1835-36.*  That  large  foreign  balance  against  the  U.  S. 
produced  a  drain  of  coin  from  the  country,  and  greatly 
reduced  the  bank  reserves.  This  necessitated  a  reduc- 
tion of  their  issues  by  the  banks,  because  they  were 
banking  on  coin.  But  this  Avas  only  an  accidental 
cause.  If  the  banks  had  had  a  surplus  of  reserves, 
the  balance  of  trade  against  the  United  States  would 
not  have  caused  th.6  contraction,  and  the  country  would 
have  been  spared  the  universal  suffering  of  such  a 
crisis.  Any  other  circumstance  which  might  have 
caused  a  reduction  of  the  bank  reserves  would  have 
produced  the  same  effect  that  was  produced  by  the 
balance  of  trade  against  the  country. 

Paper  money  was  at  a  discount,  and  as  always  is  the 
case,  under  the  circumstance,  coin  almost  ceased  to 
circulate,  and  found  its  way  to  its  hiding  places.  This 
being  the  case,  the  paper  constituted  the  circulating 
medium,  and  it  amounted  to  about  $10  per  capita. 
The  most  ardent  advocate  of  resumption  will  not  assert 
that  that  was  more  money  than  the  country  needed. 
The  crisis,  then,  was  not  owing  to  the  amount  of  money 
— ^to  too  much  money. 

The  fundamental  cause  of  the  crisis  of  1837-39  rested 


*  This  balance  was  produced,  as  has  been  shown,  not  by  the 
quantity  but  by  the  kind  of  paper.  Such  must  always  be  the  effect 
of  inflation  of  redeemable  bank  paper,  because  it  produces  an  infla- 
tion of  coin  prices,  being  redeemable  in  coin.  Such  is  never,  cannot 
be  the  effect  of  an  inflation  of  irredeemable  paper,  because  inflati(»ns 
of  the  latter  only  inflate  the  paper  prices,  not  coin  prices,  hence,  it 
creates  no  inducements  to  import  goods. 


CRISES  TO  THE  CLOSE  OF  TUE  KEBELLION.  287 

in  the  financial  system  of  that  time.  The  nature  of 
the  banking  system  was  the  funuamental  cause,  and 
the  drain  of  coin  from  the  country  the  accidental  or 
immediate  cause.  That  sj'stem,  or  any  other  which 
makes  bank  notes  redeemable  in  coin  on  presentation, 
induces  an  inflation  of  the  currency  when  bank  re- 
serves or  prospects  of  bank  reserves  are  favorable,  and 
necessitates  a  contraction  of  the  currencv  when  bank 
reserves  are  reduced  or  when  the  prospects  for  ample 
reserves  are  adverse.  These  characteristics  of  the  sys- 
tem subjected  the  currency  to  frequent,  various  and 
sudden  nmtations,  induced  by  foreign  balances  or  any 
circumstance  causing  an  outflow  of  coin.  And  the  con- 
traction of  the  currency  drjing  up  the  fountains  of 
trade,  cutting  off  the  means  of  paying  obligations  and 
crippling  credit,  brought  down  prices  of  all  property, 
reduced  wages,  diminished  demand  for  labor,  ruined 
debtors,  and  distracted  the  country  with  the  universal 
cry  of  hard  times  and  suffering.  This  was  the  cause 
of  the  crisis  of  1837.  Had  the  $163,000,000  of  paper 
currencv  out  in  1835  been  leo-al  tender,  and  its  volume 
remained  undiminished,  the  crisis  could  not  have  come. 
There  was  another  remote  cause  which  operated  on 
the  financial  and  commercial  affairs  of  the  United 
States  between  1837  and  1849.  This  was  the  crisis 
that  occurred  in  England,  and  the  panic  in  Belgium 
and  France.  These,  reducins;  values  and  increasinir  the 
general  demand  for  gold,  operated  unfavorably  upon 
both  the  commerce  and  finances  of  America.  With 
varying  degrees  of  intensity  and  occasional  symptoms 
of  returning  prosperity,  the  blighting  effects  of  the 
crisis  of  1837-39  continued  for  several  years,  followed 
by  another  in  1847,  the  effects  of  which  continued  un- 


288        MONETARY  HISTORY  OF  THE  UNITED  STATES  : 

til  1849.  The  crisis  of  1857  resulted  from  causes  sim- 
ilar to  those  of  1837.  On  the  1st  day  of  January, 
1857,  the  total  bank  paper  in  circulation  was  $214,- 
799,000,  and  coin  in  banks  $59,272,000.  This  was  an 
undue  issue  of  paper  in  proportion  to  the  coin  reserves, 
but  it  was  not  more  money  than  the  country  needed. 
Over-issues  necessitated,  at  some  time  or  other,  a  draw- 
ing in  of  bank  notes.  This  process  was  resorted  to  in 
that  year.  The  contraction  of  the  currency  was  so 
great  in  1857,  that,  by  the  first  of  January,  1858,  it  was 
reduced  to  $155,208,000  from  $214,769,000  on  the 
same  date  of  the  preceding  year.  Such  a  destruction 
of  the  means  of  conducting  business  and  paying  debts 
produced  a  heavy  fall  of  prices,  and  disastrous  effects 
amonir  the  commercial  and  business  classes  of  the 
country.  This  crisis  was  not  caused  by  too  much 
paper  money  for  the  uses  of  the  country.  It  was 
caused  by  the  increased  imports  for  the  year  ending 
June  30th,  1857,  amounting  to  $38,000,000  more  than 
for  the  preceding  year.  This  necessitated  large  ship- 
ments of  coin  abroad,  caused  runs  on  the  banks,  a 
heavy  reduction  of  the  volume  of  money,  and  the  crisis. 
These  experiences  will  not  fail  to  excite  in  the  dullest 
brain  a  sense  of  danger  attending  any  financial  system 
based  on  the  precious  metals.  Gold  and  silver  are  the 
world's  money.  They  are  constantly  flowing  in  and 
out  of  all  countries,  but  in  very  irregular  volume. 
Their  volume  and  value  in  any  nation  are  subject  to 
quick  and  material  changes,  effected  by  crises,  resump- 
tion of  specie  payments,  war,  or  great  prosperity  in 
any  other  powerful  nation  with  which  the  foi-mcr  has 
commercial  relations.  Thus,  a  crisis  in  Il^ngland  affects 
the  world.     A  crisis  in  France,  German v,   or  America 


CRISES  TO  THE  CLOSE  OF  THE  REBELLION.  28& 

affects  each  other  and  England.  It  appears  unwise  to 
the  writer  for  any  nation  to  adopt  a  system  of  finance 
which  is  subject  to  disaster  from  the  extraneous  causes 
and  circumstances  named.  Any  paper  currency  based 
on  or  redeemable  in  coin  is  subject  to  these  evils. 

The  Secretary  of  the  United  States  Treasury,  in  his 
report  of  December  7th,  1874,  says  :  "  The  quality  of 
a  stability  in  money  attaches  only  to  coin."  This  idea 
has  been  the  base  upon  which  has  rested  English  and 
American  financiering  for  nearly  a  century.  It  is  also 
the  great  error  which  has  distressed  these  countries 
with  frequent  and  dreadful  financial  crises.  It  is  not 
true  :  coin  is  not  stable,  either  in  value  or  volume. 
This  is  too  well  known  by  every  observer  to  need  con- 
firmation. 

The  discovery  of  gold  in  California  and  Aus- 
tralia reduced  its  value  from  20  to  50  per  cent.  Its 
volume  has  experienced  changes  equally  great.  Look 
at  the  changing  volume  of  coin  in  England,  as  reported 
in  the  prccetling  pages.  Consider  the  reports  of  the 
Mint  Dire(!tor,  who  says  the  coin  in  the  United  States 
in  1874  was  $166,000,000,  and  that  it  was  $242,000,000 
in  1877.  Consider  the  fluctuations  of  the  values  of 
gold  and  silver  with  reference  to  each  other :  they  have 
range  from  1  to  UtoV  in  A.D.  1543  to  about  1  to  16xVff 
in  1877.  Remember  that  banks,  when  banking  on  coin, 
issue  about  half  to  two-thirds  as  much  paper  as  there 
is  coin  in  the  country,  and  from  two  to  four,  and  some- 
times ten,  times  as  much  as  they  have  coin  in  their 
vaults.  If  in  such  case  the  coin  is  doubled,  the  paper 
issues  will  about  double,  producing  inflation.  If,  on 
the  other  hand,  the  coin  should  be  reduced  one-half, 
volume    of    paper   money   will   b§   reduced   one-half. 


290      MONETARY  HISTORY  OF  THE  UNITED  STATES  . 

Fluctuations,  sudden  and  great,  in  the  volume,  and 
consequently  in  the  value  or  purchasing  power  of  mon- 
ey, are  the  great  evils  attending  a  paper  money  redeem- 
able in  coin. 


CHAPTER  XIX. 


MONETARY    HISTORY    OF    THE    UNITED    STATES  : 
THE    PRESENT    CRISIS. 

The  watch  fires  of  the  armies  had  hardly  died  out, 
the  smoke  of  battles  had  scarcely  disperse^,  before  the 
government  began  to  tinker  with  the  currency.  Not 
content  with  the  devastations  of  war  and  the  desolation 
of  battles,  they  were  intent  on  experimenting  upon  the 
nation's  money.  Either  ignorantly  or  wickedly  they 
set  in  motion  a  force  more  destructive  of  the  commer- 
cial wealth  of  the  nation  than  the  deadly  conflict  of 
battles  or  the  exhausting  powers  of  a  long  war. 

Blinded  by  the  fallacious  logic  and  truculent  to  the 
overshadowing  powers  of  the  bond-holders  and  bullion- 
ists,  which  have  so  long  controlled  the  financial  measures 
of  Europe  and  America,  the  government  of  the  United 
States,  immediately  upon  the  close  of  the  war,  pro- 
ceeded to  destroy  the  money  which  had  nerved  the  arm 
of  the  nation  and  carried  it  successfully  and  triumph- 
antly through  one  of  the  most  gigantic  wars  of  modern 
times. 

Disregarding  the  fundamental  laws  of  national  pros- 
perity and  determined  to  force  financial  policies  totally 
inconsistent  with  the  conditions  of  the  times,  they  in- 


292     MONETARY   HISTORY   OF   THE   UNITED    STATES  .* 

augnratecl  a  rapid  contraction  of  the  currency  in  the 
face  of  enormous  indebtedness,  to  reduce  values  and 
destroy  the  means  of  discharging  obligations.  Whether 
it  was  ignorantly  or  wickedly  done  matters  little  to  the 
people  now,  because  Avhether  in  the  one  or  the  other 
sjDirit,  the  same  result  has  followed :  a  destruction  of 
wealth  and  an  accumulation  of  misery  and  WTctchedness 
unsurpassed  even  during  the  war  period.  Measures 
were  iuausfurated  for  the  fundinir  of  the  floatins:  debt 
of  the  United  States.  Within  three  years  after  the 
close  of  the  war  a  thousand  millions  of  the  nation's 
money  were  destroyed,  and  interest-bearing  bonds  sub- 
stituted instead  thereof  to  oppress  the  people  and  eat 
up  their  substance  for  years.  Credit  made  an  effort  to 
fill  the  o-reat  void^made  bv  the  retirement  of  so  much 
money,  and  succeeded  in  a  wonderful  degree  ;  but  the 
unprecedented  indebtedness  thereby  created  only  aggra- 
vated the  evil  when  the  crisis  came.  It  culminated  in 
1873  in  a  panic  which  threatened,  and  would  have 
brouirht,  o;eneral  ruin  throuirhout  the  nation  but  for 
the  virtue  of  the  remainino;  leijal  tenders.  The  con- 
traction  of  the  currency  has  continued  "vvith  steady  pur- 
pose since  1866.  The  Resumption  Act  of  1875  was 
but  an  auxiliary  to  fasten  upon  the  country  the  des- 
tructive policy  of  contraction,  and  the  effects  of  the 
crisis  preceding. 

The  forces  which  produced  the  crisis  of  1873  had 
been  operating  from  1866.  Although  credits  retarded 
the  fall  of  j)rices  and  sustained  the  business  of  the  coun- 
try with  unexampled  strength  after  the  contraction  of 
the  currency  set  in,  yet  the  tendency  of  prices  was  con- 
stantly downward  all  the  time,  and  business  classes, 
bankers,  merchants,  manufacturers,  and  traders,  either 


THE  PRESENT  CRISIS.  293 

contracted  debts  to  meet  losses  and  obligations  falling 
due  or  curtailed  their  business.  Thus  two  forces  were 
constantly  gathering  destructive  power — falling  markets 
and  increased  debts.  The  decline  of  prices  was  not 
confined  to  special  articles.  It  was  general.  With 
such  poAvers  acting  it  was  only  a  question  of  time  when 
a  crisis  would  be  reached.  It  needed  but  some  disturb- 
ins:  cause.  That  cause  was  the  enormous  balances  of 
trade  occurrinji  as-ainst  the  United  States  in  1872  and 
1873.  Notwithstanding  the  great  fall  of  prices  in  the 
U.  S.  they  w^ere  yet  higher  here  in  1872  and  the  first 
part  of  1873  than  in  Europe.  That  is  to  say,  the  coin 
values  of  merchandise  were  higher  here  than  in  Europe. 
The  near  approach  of  our  paper  to  coin  value  in  1872 
and  '73,  instead  of  indicating  future  prosperity,  pointed 
to  a  coming  crisis,  because,  while  our  paper  prices^ 
sustained  by  credit,  were  much  higher  than  in  Europe, 
the  coin  premium  was  not  correspondingly  high.  This 
induced  large  imports  for  profit,  resulting  in  great  for- 
eio;n  balances  a2:ainst  the  U.  S.,  much  of  which  had  to 
be  paid  in  coin.  Coin  being  very  scarce,  immense  of- 
ferings of  merchandise,  stocks,  corporation  bonds  and 
securities  for  sale  to  raise  coin,  precipitated  the  values 
of  these  things,  already  much  reduced  by  the  contrac- 
tion of  the  currency,  down  to  ruinous  prices.  Thence, 
the  panic,  immense  losses,  bankruptcies,  stagnation  of 
business,  and  the  setting  in  of  permanent  hard  times. 
That  crisis  did  not  bring  swift  and  general  destruc- 
tion upon  debtors  and  business  ;  but  it,  with  the  aid  of 
the  resumption  act  passed  in  1875,  brought  a  slow  but 
steadily  increasing  stringency  in  money  matters,  de- 
cline of  business,  shrinkage  of  values,  reduction  of 
wages,  increase  of  want  and  destitution,  which  culmin- 


294       MONETARY  HISTORY  OF  THE  UNITED  STATES  : 

ated  in  1877  in  the  most  appalling  and  threatening  up- 
rising of  the  "working  classes  which  ever  startled  this 
nation. 

It  is  claimed  by  some  that  business  is  reviving.  Such 
is  not  the  case.  Year  by  year  it  decreases  in  the  ag- 
gregate. 

Following  IS  a  table  of  the  business  of  the  New  York 
Clearing  House,  from  1869  to  1877,  taken  from  the' 
reports  of  the  Comptroller  of  the  Currency  for  those 
years  : 

1869 ... .  $37*407,028,987  1874 $20,850,681 ,963 

1S70 27,804,539,406  1875 23,(J42,57ti,858 

1871  ...  29  300,98(1,682  1876 21,597,274  247 

1872 32,636,997,404  1877 20,876,555,937 

1873....    33,972  773,943 

We  estimate  the  business  of  New  York,  as  shown  by 
the  clearings,  at  one-lifth  of  the  entire  business  of  the 
country.  The  clearings  reached  the  highest  point  in 
1869,  when  they  were  $37,407,028,987.  In  1877  they 
were  $20,866,555,937— less  by  nearly  $17,000,000,000 
than  in  1869.  This  shows  a  decrease  of  the  aggresrate 
business  of  the  country  for  1877  of  $85,000,000,000 
below  that  of  1869 — a  decline  of  85  per  cent.  This  is 
not  only  so  regarding  the  business  of  these  years,  but 
the  decline  has  also  been  constant  from  1875,  as  will 
be  seen  in  the  table.  The  clearings  for  1877  are  about 
$700,000,000  below  those  of  1876,  $2,200,000,000  be- 
low those  of  1875. 

To  give  a  detailed  account  of  the  disasters  produced 
by  the  contraction  of  the  currency,  the  cheapening 
system,  since  18(56,  would  be  beyond  the  ability  of  the 
writer.  It  is  not  needed,  for  all  people  have  seen  or 
felt  its  terrible  effects.  Instead,  we  give  reports  from 
all  classes  of  men  frorn  different  sections  of  the  Union, 
as  found  ni  {lublic  speeches,  newspapers,  books  and 


THE  PRESENT  CRISIS.  295 

pamphlets.  The  Hon.  "Win.  D.  Kelley,  in  a  speech 
delivered  in  the  Academy  of  Music,  Philadeli)hia,  Jan. 
15th,  187(),  said: 

"  In  1S()5  and  ISGfi,  every  man  in  Araericn  r'.io  liad  the  skill  and 
the  will  to  labor  could  earn  wages  to  support  his  family  and  lay 
something  by.  All  industries  were  qu:ck  and  active.  Production 
ran  on.  The  Ameiican  people  waked  each  new  morning  to  feel  that 
there  were  great  duties  before  them,  that  there  were  mines  to  be 
opened,  fnrges  and  furnaces  to  be  erected  to  work  the  iron,  the  cop- 
per, the  silver,  antl  the  gold  of  our  mines  New  houses  were  to  be 
built.  ISkill,  energy,  .-cience,  and  gtnms  were  taxed  to  quicken  and 
cheapen  productive  processes.  Our  wealth  grew  as  it  or  that  of 
any  other  people,  had  never  grown.  We  were  moving  onward  when 
one  Hugh  McCnlloch  tap|)ed  a  great  artery  and  let  nearly  all  the 
blood  fl-jw  from  the  body  politic.  Diseased,  paralyzed,  shrinking 
from  day  to  day,  what  American  ha.s  the  energy  to  engage  in  devel- 
oping a  new  mine?  Pennsylvauians,  who  of  you  are  ready  to  con- 
struct a  ni-w  forire  or  furnace?  Where  are  the  factories  building  to- 
dav?  Your  laborers  — moody,  sulltn  and  in  want  -  are  beggmg  the 
poor  privilege  of  earning  a  day's  food  by  an  honest  day's  labor! 
Tlieir  homes  are  being  si  ripped  of  everything  ihey  cherish.  *  * 
Courage  gone  hope  gone,  despair  crusiied  him  to  the  earth,  and 
destroyed  all  the  pride  that  made  the  American  mechanic  the  boast 
and  nouor  ot  his  country.  Many  a  man  to-day,  loiig;ng  for  honest 
work  biit  powerless  to  obtain  it,  creeps  and  crawls  from  town  to 
town,  fot)isore,  ragged,  dusty,  to  beg  from  strangers  rather  than 
from  those  wiio  know  him  and  will  remember  it — to  be  denounced 
as  a     tramp,' and  commended  to  the  custody  of  the  police      *        * 

"  Widle  the  government  has  withdrawn  C(J  per  cent,  of  our  money, 
it  has  so  destroyed  confidence  that  those  who  own  money  depost  it 
as  dead  capital  in  the  treasury  of  the  United  '■tates,  or  in  the  vaults 
of  the  banks;  they  will  not  lend  or  use  it  The  vaults  of  the  banks 
at  the  gieat  money  ci  utres  and  the  treasury  of  the  United  States  are 
gorged  with  that  winch  should  be  money — was  issued  as  money — 
and  would  be  money  if  it  were  circulating;  but  which  is  in  fact  dead 
capital  in  the  lorm  of  money.  Therefore,  all  exchanges  of  hibor  or 
comm<.)dities  not  required  by  the  exigencies  of  life  are  suspended." 

Extract  from  a  speech  of  Senator  Beck,  of  Ken- 
tucky : 

"The  country  has  been  brought  by  law  to  the  point  where  all 
debts  of  ttie  general  government,  of  the  states,  of  the  municipalities, 
of  the  railro-id  and  other  corporations,  as  well  as  of  private  individ- 
uals, have  to  be  paid  in  gold  alone,  or  its  equivalent,  on  and  after 
the  first  day  of  January.  1879,  about  seventeen  months  from  this 
date.  *  *  We  have  not  got,  and  cannot  possibly  obtain  be- 
fore that  date,  $'^00,000,0'  0  in  gold  *  *  Forced  resumption 
now  fastened  upon  us  is,  under  such  circumstances,  universal  bank- 
ruptcy; the  number  and  magnitude  of  failures  of  our  businessmen 
are  fearful  to  cont'inplate,  and  we  are  daily  going  from  bad  to 
worse.     The  federal  and  state  governments,  the  banks  and  other 


296       MONETARY  HISTORY  OF  THE  UNITED  STATES 


corporations,  are  all  compelled  to  contract  their  loans  and  their  cir- 
culation in  order  to  meet  what  tliey  have  outstanding  in  gold,  which 
they  must  of  course  make  the  smallest  amount  possible.  No  pru- 
dent man  dare  borrow  money  now  to  invest  in  any  business,  as  it  is 
obvious  that  he  cannot  hope  to  realize  enough  from  the  sale  of  any 
product  of  industry  hereafter  to  repay  the  money  he  borrows  and 
its  interest  in  gold.  A  lender  may  be  willing  to  lend  $10,000,  taking 
a  mortgage  on  a  farm  for  $20,000,  in  the  hope  of  buying  it  in  for  the 
$10,000  loaned;  but  the  owner  of  such  a  farm,  no  matter  how  much 
he  wants  the  money,  dare  not  borrow.  Yet  we  are  told  money  is 
abundant!  Certainly,  because  safe  borrowers  can.iot  be  found. 
Manufacturing  establishments,  rolling  mills,  industries  all  over  the 
land,  which  demnnd  vast  sums  of  money,  a.-e  closed,  and  their  hands 
are  tramps  or  strikers,  because  there  is  not  only  no  prospect  of  pro- 
fit, but  a  certainty  of  absolute  ruin  by  a  c-  .ntinuance  of  the  business. 
Yet  the  bondholders  and  other  leeches  who  are  demanding  gold,  and 
gold  only,  so  that  they  can  buy  property  at  their  own  prices,  are 
continuing  the  cry  that  money  is  cheap  and  abundant.  Does  any 
gentleman  here  (unless  he  is  a  banker  or  bondholder)  know  now 
where,  or  from  whom,  he  can  obtain  gold  to  pay  his  debts  or  meet 
his  liabilities?  The  government  pays  gold  only  to  the  bandholder; 
from  him  only  can  it  be  obtained,  at  his  own  rates,  by  those  who 
are  compelled  to  have  it." 

Extracts  from  an  open  letter  from  Peter  Cooper  to 

President  Hayes,  after  the  strikes  of  1877  : 

"Although  I  have  but  lately  addressed  you  an  open  letter  on  the 
sad  state  of  the  industrial  and  financial  conditions  of  our  common 
country,  and  the  causes  that  have  brought  it  about,  yet  the  events 
that  have  since  transpired,  while  they  have  given  additional  empha- 
sis to  that  appeal,  justify  me  in  once  more  addressing  you  on  the 
same  subject. 

"Surely  the  peaceful  expostulations  and  complaints  of  so  many 
thousands  of  your  fellow-citizens,  going  up  from  every  part  of  this 
distressed  country,  not  to  speak  of  the  violence  and  lawlessness 
which  the  distress  has  occasioned,  not  only  appeal  to  your  humani- 
ty and  patriotism,  but  call  for  the  most  earnest  and  instant  action 
on  the  part  of  the  government  of  which  you  are  the  Chief  Executive. 

"More  than  200,000  men,  within  the  last  few  weeks,  have  joined 
in  'strikes'  on  the  various  railroad  lines,  the  workshops,  and  the 
mines  of  the  country,  on  account  of  further  reduction  in  their 
wages,  already  reduced  to  the  living  point.  That  some  of  these 
strikes  have  been  attended  with  lawless  and  unjustifiable  violence 
only  shows  the  intensity  of  the  evils  complained  of,  and  the  despair 
of  the  sufferers.  For  four  years  past,  since  the  'panic  of  1873,* 
millions  of  men  and  women,  in  this  hitherto  rich  and  prosperous 
country,  have  been  thrown  out  of  employment,  or,  livino:  on  precar- 
ious and  inadequate  wages,  have  felt  embittered  with  a  lot  in  which 
neither  economy  nor  industry,  nor  a  cheerful  willingness  to  work 
hard,  can  bring  any  alleviation. 

"Is  it  to  be  wondered  at  that  enforced  idleness  has  made  tramps 
of  so  many  of  our  laboring  population,  or  induced  them  to  join  the 
criminal  and  dangerous  classes? 


THE    PRESENT    CRISIS.  097 

"During  the  same  period,  immisration  into  this  country  of  the 
hardy  and  industrious  of  all  nations,  who  have  hitlierto  built  up  our 
country,  has,  in  a  ^reat  measure,  stopped,  while  thousands  of  arti- 
sans and  mechanics,  whom  a  prosperous  couutry  cannot  spare,  are 
emiscratinir  to  other  countries.  Our  manufactories  are,  many  of 
them,  closed,  or  runniiii;  at  a  loss,  or  sriviiis  starvation  prices  to 
their  operatives.  Our  merchants  are  demaudinf:  a  reduction  of  their 
rents,  dischariiinEf  many  of  their  employees,  and  such  as  are  "in 
debt  are  fast  goinir  into  bankruptcy.  The  mining  and  railroad  in- 
terests of  the  country,  on  wliich  the  income  and  the  employment  of 
so  many  thousands  depend,  are  fast  succumbing;  to  the  irener.d  fail- 
tire  in  the  tinanres  of  the  country,  so  that  their  stocks  have  become 
depreciated  or  worthless,  and  their  employees  discharged  or  muti- 
nous on  account  of  reduced  wages.  Real  Estate  has  depreciated 
to  less  tlian  half  of  what  it  would  have  brought  four  years  ago; 
much  of  it  cannot  be  s  dd  for  any  price,  and  mortgages  of  one-quar- 
ter its  value,  if  foreclosed,  swallow  up  the  whole.  The  thriving 
and  enterprising  firmer  of  the  West,  especially,  feels  this  lise  in 
the  value  of  money,  as  compared  with  hibor  or  property.  Wiih  the 
hardy  toil  of  years,  he  has  opened  and  improved  his  farm,  and  the 
comparatively  small  loan,  which  laid  but  a  light  weight  on  the  re- 
sources of  his  land  in  prosperous  times  and  with  a  sufficiency  of 
money,  is  now  threatening  to  swallow  up  the  labor  of  his  life! 
Even  the  banks  and  the  loaning  institutions,  not  being  able  to  invest 
their  money  on 'good  securities,' are  embarrassed  on  both  sides — 
the  failure  of  their  debtors,  that  throws  so  many  of  the  securities 
on  thi-ir  hands,  anrl  makes  bonds  and  mortgages  a  'glut  in  the 
market,'  and  the  difficulty  of  making  any  new  loans  or  investments 
— so  that  money  'goes  a  begging'  at  one  and  a  half  and'  two  per 
cent. 

*  During  the  last  ten  years  thousands  of  millions  of  money  have 
been  swallowed  m  government  and  railroad  bonds  and  other  secur- 
ities, and  in  importations  which,  till  lately,  have  far  exceeded  our 
exportations.  It  is  a  fact  on  record  in  the  books  of  the  United 
States  Treasury,  and  by  such  authorities  as  Spaulding  in  his  'His- 
tory of  the  Currency,'  Mr  Maynard,  chairman  of  the  committee  on 
banking  and  currency  in  Congress,  and  Spinner,  Assistant  Secretary 
of  the  Treasury,  that  this  country  had,  up  to  the  year  18G.5,  issued, 
in  different  forms  of  currenc}'  and  treasury  notes,  current  as  n.ouey 
among  the  people,  S2,l'.t2, 305,527!  This  vast  sum  had,  on  the  first 
of  November,  1873,  shrunk  to  §(531,488,076  (see  Congressional  liecord, 
March  31,  1874.)" 

From  a  letter  of  Sydna  Meyers,  a  banker  and  writer 
of  ability,  of  Chicago,  III.  : 

"  Bounteous  nature  has  lavished  upon  this  land  resources  of  wealth 
bej-oud  all  others.  Her  soil  is  fertile,  her  mines  are  rich  and  not 
yet  fully  d  veloped,  her  timbers  are  varied  and  abundant,  her 
rivers  a:e  navigable  and  furnish  highways  for  commerce  through 
thousands  of  miles  of  fertile  regions,  tiie  extent  of  her  railways 
exceeds  that  of  any  other  nation,  her  climate  is  salubrious,  her  peo- 
ple industrious,  and  the  material  progress  of  the  last  century  is  only 


S)0/?        MONETARY  HISTOEY  OF  THE  UNITED  STATES  .* 

an  earnest  of  her  capabilities.  Witli  all  these  advantages,  industry 
is  paralyzed  and  the  people  are  sufferiau;  distress. 

•'Tile  depreciation  of  the  greenback  by  the  unwise  mutilation  of 
the  legal  tender  power,  and  the  abrogation  of  its  convertibility  into 
interesL-bearing  certihcates,  has  been  the  main  cause  of  all  our 
trouble.  It  was  this  caused  the  depreciation  of  the  greenback — it 
was  the  dei)reciation  which  led  to  the  unwise  policy  of  arbitrarily 
contracting  the  currency,  as  it  was  said,  'to  raise  its  value  to  gold.' 
This  policy  has  been  a  complete  failure,  for,  after  a  contraction  of 
$G8G,000,0b0  by  Secretary  McCulloch  in  two  years,  1866-67,  g  Id  was 
higher  than  it  was  before  contraction  began.  And  yet  this  policy  is 
persistently  going  on.  We  are  burning  greenbaclvS,  the  best  circu- 
lating medium,  and  substituting  long-time  bonds — adding  to  the 
interest  bearing  debt— bankrupting  the  country,  and  for  what?  To 
return  to  a  system  that  has  repeatedly  failed  and  must  ever  fad. 

"The  contraction  of  tlie  currency  has  paralyzed  industries,  de- 
preciated the  value  of  every  kind  of  property  to  the  extent  of  thous- 
ands of  millions  of  dollars.  It  has  increased  the  annual  number  of 
bankrupts  from  530  in  18G5  to  [1,002  in  1876— has  deprived  2,000,000 
persons  of  employment,  and  spread  a  pall  of  gloom  over  the  whole 
country,  which  is  a  sure  forerunner  of  ciimc  and  turbulence." 

Relating  to  the  strike  of  1877,  the  New  York  Sun 
said : 

"  When  the  five-twenty  bonds  were  first  issued,  no  condition  was 
attached  to  them  requiring  payment  in  coin,  except  as  to  the  inter- 
est. Tlie  debates  and  voles  prove  incontestably  that  there  was 
no  obligation  to  redeem,  except  in  legal  currency,  and  Mr.  Sherman, 
now  Secretary  of  the  Treasury,  was  c  nspicuous  in  asserting  that 
fact  at  the  time,  and  in  opposition  to  an  amendment  to  redeem  in 
gold.  The  bondholders  were  largely  represented  in  both  Housi'S  of 
Congress,  and  the  outsiders  were  not  idle.  A  great  lobby  was  or- 
ganized, and  in  1869  these  bonds  were  made  payable  in  gold.  By 
this  legislation  the  bondholders  profited  to  the  extent  of  several 
hundred  millions,  and  the  taxpayers  were  burdened  proportionately. 

"  Most  of  the  legislation  for  the  banks  was  manipulated  by  a  com- 
mittee of  which  the  chairman  was  a  shrewd  bank  president,  and 
others  were  bank  directors.  Those  iu-titutions,  under  fostering 
charters  and  friendly  protection  at  Washington,  grew  rapidly  into 
wealth,  and  many  of  them  paid  fabulous  dividends  before  the  crash 
came.  After  seven  years  of  fictitious  success,  the  bubble  burst  by 
the  bankruptcy  of  one  of  the  pillars  of  the  vicious  system,  and  in 
spite  of  the  illegal  efforts  of  the  tlien  Secretary  of  the  Treasury  to 
prevent  an  inevitable  catastrophe.  The  ruin  and  misery  inflicted  by 
the  collapse  of  ls73,  and  by  its  consequences  since  tiien,  cann..>t  be 
measured  in  money  Of  all  the  sufferers,  tlie  laboring  men  and 
their  fanulies  have  had  most  to  endure,  not  only  in  the  reduction  of 
wages,  but  also  in  the  increase  of  tlieir  burdens — for  it  is  not  the 
ricii  class,  by  any  means,  who  p.ay  the  bulk  of  the  taxes.  They  are 
the  favored  few,  who  do  not  feel  the  turn  of  the  screw  which  makes 
poverty  shriek  in  agony. 

•It  is  not  to  be  supposed  that  the  workingmen,  laborers  and 
others  were  indifferent  spectators  to  these  events.    They  saw  great 


THE   PRESENT    CRISIS.  299 

corporations  and  rings  combining  to  increase  their  wealth  and  they 
combined  also  for  their  interests.  ♦         *  *         -yy-Q  must  de- 

plore the  sad  scenes  and  the  awful  events  of  the  past  week ;  but  cer- 
tainly no  reflecting  and  candid  man,  who  recalls  the  recent  past  and 
observes  the  actual  present,  can  entirely  wonder  at  them." 

Mr.  Smith,  of  Georgia,  in  Congress,  June  14tli.  1876 

said :  *> 

"A  casual  survey  of  the  condition  of  the  people  and  government 
of  the  United  States  does  not  produce  the  most  encouraging  impres- 
sions. The  cry  for  relief  to  Congress  comes  from  every  suction  of 
this  great  country — from  every  industry,  and  from  every  grade  of  hu- 
man life.  The  distress  is  paralyzing  the  manufacturer,  the  merch- 
ant, the  mechanic,  the  farmer,  and  the  laborer;  and  so  far  from 
touching  the  bottom  of  this  linaucial  quicksand  and  re-ascending,  it 
seems  as  if  we  were  sinking  deeper  and  deeper,  and  our  condition 
becoming  gradually  worse  and  worse.  ***** 

"And  why  is  tiiere  a  clamor  rising  from  the  mouths  of  the  millions 
— deep-toned — admonishing  the  country  that  there  is  something  ti- 
naiicially,  criminally  wrong  in  the  administration  of  the  monetary 
atfairs  of  this  country? 

"  Rfpreseiitatives,  you  have  only  heard  the  crepitation  of  the  vol- 
cano; soon  you  will  hear  the  explosion  of  the  crater  unless  there  is 
relief.  And  it  is  wise  to  give  that  relief  before  the  lava  is  thrown 
higli  nnd  far  over  hill  and  plain  iu  scorching,  consuming  tires  upon 
the  autliors  of  the  people's  wrongs." 

The  N.  Y.     Telegram,  of  July  9th,  1877,  pul)lishcd 

the  foUowinij  in  reference  to  Brooklyn  workinojnien  : 

"The  summer  of  1877  thus  far  bids  fair  to  rank  second  to  none 
in  recruiting  the  great  army  of  unemployed  laborers,  both  skilled 
and  iinskilk'd.  Cleanly,  pooi'-looking  men  stand  on  the  street  corn- 
ers looking  wistfully  up  and  down  the  block  for  the  si:zn  of  '  a  job. ' 
And  here  and  there,  should  an  odd  building  be  commenced,  the  appli- 
cants for  work  cluster  in  crowds.  The  action  of  the  Commissioners 
of  Board  of  City  Works  yesterday,  in  discharging  a  large  number  of 
laborers  who  were  engaged  in  tilling  up  sunken  lots,  has  led  to  severe 
criticism,  not  only  among  the  men  who  were  affected  by  the  action, 
but  also  among  matiy  taxpayers,  who  recognize  the  propriety  of  giv- 
ing work  to  the  i)oor  laborers  in  tlie  summer  mouths,  in  order  that 
they  niiiy  l)e  enabled  to  save  a  liltle  money  and  make  provision  of 
some  description  for  their  families  for  the  winter.  The  City  Hall 
Park  is  the  scene  of  large  assemblages  of  idle  workmen  daily,  who 
sit  brneath  the  shade  trees  and  look  toward  the  great  marl)le  struc- 
ture as  though  they  were  expecting  momentarily  a  summons  from 
the  municipal  government  olHcials  to  go  to  work.  One  of  these  men 
remarked  to  his  companions  to-day :  -The  politicians  nuike  well  of 
us,  any  how.  They  get  our  votes,  and  after  that  we  may  go  to  the 
poor-house  or  to  prison.  In  winter  ihey  tell  us  we  shall  have  work 
when  snow  disappears — when  the  spring  comes.  In  April  they  tell 
us  the  money  is  out,  and  when  at  last  we  get  to  work  they  discharge 
us,  telling  us  taxes  are  too  high  and  all  public  works  must  stop. 
So  here  we  ai'e,  and  the  politicians  are  all  right.'  " 


300     MOXETARY   HISTORY    OF    THE    UNITED    STATES  : 

True  Citizen,  of  August,  1877,  on  the  tendency  to 
concentration  of  property  in  this  country,  as  in  Eng- 
land, resulting  from  bad  financial  policy  : 

"  CONCEXTRATION   OF   PROPERTY. 

"This  journal  has,  with  uuswerving  persistency,  for  many  years 
patiently  endeavored  to  impress  upon  the  citizens  of  this  republic 
the  re^^ults  which  would  surely  follow  from  class  legislation  as  con- 
trasted with  careful  and  conscientious  attention  to  the  rights  of  all. 
In  exemplification  of  this,  among  other  illustrations,  we  have  refer- 
red to  the  experience  of  the  Repubic  of  Venice,  where  the  buying 
and  debt-paying  power  of  its  full  legal  tender  paper  money  was  for 
centuries  largely  greater  than  that  of  specie,  which  had  been  demon- 
etized. In  fact,  the  diflereuce  was  at  one  time  as  great  as  thirty  per 
cent  against  specie,  when  the  government  interposed  and  limited 
the  ditlerence  to  twenty  per  cent.  In  other  words,  they  made  gold 
and  silver  legal  tender  at  eighty  cents  on  the  dollar. 

"vve  have  repeatedly  compared  the  more  recent  practical  working 
of  the  French  contrasted  with  the  English  and  American  schools  of 
political  economists,  but  have  done  so  mostly-  to  show  the  eflect  of 
class  legislation  on  the  industries  and  contiuous  employment  of  the 
people. 

"The  object  of  this  article  is  to  show  how  surely,  though  slowly, 
such  special  legislation  stops  the  progress  of  civilization,  and,  by  ab- 
sorption of  small  estates,  re-establishes  the  feudalism  of  tlie  medi- 
aeval barons  which  was  fondly  supposed  to  have  been  buried  with 
other  debris  of  barbarism. 

"Mr.  Willies,  iu  a  series  of  letters  to  the  New  York  Herald,  wrote 
from  Paris,  September  21,  1871,  as  follows: 

"  'In  England,  throiigh  the  centralizing  influences  of  the  laws  of 
primo'zeniiure  and  entails,  which  tie  the  laud  to  families  and  fasten 
its  descent  from  eldest  son  to  eldest  son,  the  entire  surface,  on  which 
so  mauy  meu  depend  for  tiieir  subsistence,  is  owned  by  tlie  ridicu- 
lously small  number  of  thirty-tico  thousand  proprietors ;  and  the 
number  of  these  proprietors  is  annually  decreasing,  throi'gh  laws 
which  load  the  transfer  of  land  with  so  much  expense  that  it  has 
ceased  to  become  a  marketable  article.  *  *  *  As  an  evidence 
of  this,  there  were  in  England,  a  hundred  years  ago,  two  huudred 
and  fifty  thousand  proprietors,  for  the  thirty-two  thousand  owners 
of  to-day.  To  quote  from  Mr.  George  Odger,  who  has  recently  pub- 
lished an  able  article  upon  the  Land  Queston  in  the  Contemporary 
Hevieio  of  Loudon : 

"  'A  better  notion  of  the  growth  of  our  land  monopoly  may  be  ob- 
tained from  the  following:  The  Earl  of  Breadalbane  can  ride  on 
his  own  property  lou  miles  from  his  own  house  in  a  single  direction. 
The  Duke  of  Southerland  owns  the  county  of  the  same  name;  this 
county  reaches  from  sea  to  sea.  The  Duke  of  Richmond  holds  pos- 
session of  340,000  acres  at  Gordon  Castle  and  Goodwood;  and  the 
Duke  of  Devonshire  f)G,000  acres  in  the  county  of  Derby  alone.  It 
has  been  authoritatively  stateil  that  less  than  IGO  persons  now  own 
oue-lialf  of  England  and  three-fourths  of  Scotland.  The  way  in 
which  political  power,  so  largely  monopolized  by  landed  proprie- 
tors, has  been  used,  may  be  gleaned  from  the  fact  that  within  the 


THE  PRESENT  CRISIS.  '  301 

last  two  hnndred  years,  7,000,000  acres  of  common  lands  have  been 
added  to  their  estates — that  is  the  estates  of  adjoining  proprietors.' 

'We  are  free  to  confess  that  upon  the  perusal  of  this  letter,  in- 
cluding the  author's  inference,  that  we  in  in  this  country  were  fast 
traveling  in  the  same  direction,  at  the  time  of  publication,  we  felt 
inclined  to  classify  the  writer  with  the  large  and  increasing  school 
of  Jeremiahs,  and  charitably  ascribed  its  gloomy  prophecies  to  a'bad 
cold  in  the  liead  or  an  attack  of  dyspepsia;  but  the  annexed  extract 
from  the  New  York  Tirnes  gives  the  correspondence  almost  the  dig- 
nity of  a  prophecy : 

"  "It  is  very  certain  that  American  agriculture  is  on  the  eve  of  ser- 
ious changes  and  of  great  improvements.  This  must  be,  for  it  can- 
not go  back  and  it  cannot  stay  Avhere  it  is.  The  greatest  intlustry 
of  the  country  cannot  remain  in  an  iinprofitable  or  unsatisfactoiy 
condition,  nor  can  it  l'>ng  remain  without  the  use  of  adequate  c;ipi- 
tal  to  invigorate  it  and  give  it  full  scope.  T!\ousands  of  persons 
now  idle  look  to  it  for  employment,  and  if  there  were  farms  to  rent 
there  would  be  plenty  of  tenants  for  them.  Everything  seems  ripe 
for  the  change.  Half  the  farms  in  the  country  are  reatty  to  be  sold, 
if  buyers  would  appear:  and  hundreds  that  can  now  be  bought  for 
less  than  their  value  20  or  3u  years  ago  need  only  some  judicious 
outlay  to  make  them  as  productive  as  ever.  Few  farmers  cm  hope 
to  provide  their  sons  with  farms  of  their  own,  and  there  is  no  place 
for  these  j'oung  men  in  the  overcrowded  cities.  But  to  stock  a 
rented  farm  is  not  so  difficult  a  matter  for  a  father  intent  on  start- 
ing a  sou  in  life  This  would  be  easy  to  do  if  the  faim  could  be 
rented  on  a  long  and  satisfactory  lease.  But  before  this  can  be 
done  the  owner  of  the  land  must  hold  it  as  a  i^ermanent  investment, 
and  not  as  a  property  to  be  offered  for  sale  to  the  first  comer.  When 
farm  land  is  so  held  by  the  owners,  there  will  be  some  probability, 
if  not  certainty,  that  it  will  be  permanently  improved,  and  then 
such  property  will  ])e  eagerly  sought  for  by  tenants  who  will  be  able 
and  willing  to  rent  it  on  long  leases,  and  cultivaie  it  in  a  more  pro- 
ductive and  profitable  manner  than  farms  are  now  worked.  And 
then  will  begin  a  new  era  in  American  agriculture,  and  one  that 
seems  to  be  very  det<irable.^ 

♦'Commenting  on  the  foregoing  bold  proposition  to  establish  on 
this  hemisphere  something  akin  to  the  serfdom  which  has  been  vol- 
untarily discarded  by  the  Russian  Czar,  Henry  C.  Carey,  in  an  open 
letter  to  the  President,  says: 

"  'Throughout  Mr.  Lincoln's  administration  the  internal  commerce 
of  the  free  States  grew  with  wondei-ful  rapiility,  making  such  de- 
mands for  labor  and  its  products,  raw  and  manufactured,  that  far- 
mers everywhere  were  enabled  to  free  their  property  from  the  mort- 
gages by  which  it  had  before  been  bound.  Under  the  present  system 
the  internal  commerce,  where  not  already  dead,  is  dying,  and  with 
each  successive  day  there  comes  increased  necessity  lor  forcing  the 
products  of  the  soil  on  distant  markets,  with  constantly  increasing 
competition  for  their  sale,  and  as  constant  decline  in  their  prices,  as 
a  consequence  of  which  the  pressure  of  interest  becomes  daily  more 
severe,  until  at  length  the  sherifl"  performs  his  part  by  converting 
the  independent  farmer  of  the  Lincoln  and  greenback  period  into 
that  humble  tenant  of  the  more  civilized  hard  money  man  so  wel 
described  by  the  Usurer's  Advocate  of  New  York  City.' 


302     MONETARY    HISTORY    OF    THE    UNITED    STATES: 

"Corroborative  of  the  dismal  picture  drawn  by  the  New  York 
Times,  is  the  subjoined  extract  from  the  editorial  correspondence  of 
the  New  Jersey  Frca  Press,  dated  Sussex  County,  New  Jersey,  July 
7th: 

"  'With  all  the  apparent  wealth  and  prosperity  in  and  about  this 
region,  we  were  pained  to  learn  that  some  of  the  farmers  have  been 
obliged,  this  Spring,  to  give  chattel  mortfjages  on  their  stock,  in  order 
to  meet  their  interest  and  taxes,  and  that  tlie  occurrence  was  not  au 
uncommon  one  in  the  neigliborhood.  Wlien  such  things  can  be.  it 
proves  tliat  complete  exiiaustion  is  not  far  ahead,  and  unless  tax- 
payers can  have  their  relief  soon,  a  general  caving  in  of  farmers  wUl 
soon  follow.'  " 

New  York  Herald,  July  24th,  1877  : 

"Ever  since  1873  railroads  have  been  going  into  bankruptcy,  and 
this  is  even  now  goiu;;-  on  at  a  rate  which  few  people,  exc.^pt  those 
interested  in  this  kind  of  property,  suspect.  During  the  six  months 
ending  the  1st  of  this  mouth,  foreclosure  sales  have  been  ordered  of 
fifteen  roads,  with  a  capital  stock  of  over  forty-seven  millions,  and 
a  debt  of  over  eighty-five  millions.  During  the  same  lime  thirty-two 
roads,  representing  nearly  fifty  millions  of  stock  and  over  seventy- 
five  millions  of  debt,  have  been  sold,  and  receivers  havt^  been  ap- 
pointed for  sixteen  roads,  with  stock  and  debt  amounting  to  over 
one  hundred  and  fifty  millions." 

From  the  Missouri  Republican,  August  27th,  1877  ; 

"  Municipal  Debts. — A  recently-prepared  table,  giving  the  com- 
parative valuations  and  debts  of  thirty-seven  cities  in  this  country, 
each  with  a  population  of  over  40,000,  for  the  years  1876  and  1866, 
throws  a  good  deal  of  light  on  the  present  hard  times.  The  aggre- 
gate valuations  of  these  cities  in  1866  were  ^2,300,84:2,000;  in  1876, 
$4,008,580,981;  their  aggregate  populations  in  1866  were  2,671,."i54; 
in  1876,  5,043,618;  their  aggregate  debts  in  1866  were  f  l."2,055  877; 
in  1876,  #436,608,119;  and  their  aggregate  taxes  in  1866  were  S42,- 
523,574;  in  1876,  $79,333,777.  The  increase  in  debt  for  ten  years 
has  been  187  per  cent. ;  increase  in  valuation,  74  per  cent. ;  increase 
in  taxation,  86  per  cent.;  increase  in  jiopulation,  88  per  cent  ;  pro- 
portion of  debt  per  mpito  $86.50.  The  exhibit  for  130  cities  is  as 
follows:  Debts  in  1866,  $221,312,000;  in  1876,  $644,378,000;  valua- 
tion in  1866,  $3,451,719  000;  in  1876,  $6,175,082,000;  taxes  in  1866, 
$64,060,000;  in  1876,  $112,711,000;  population  in  1866,  4,919,000;  in 
1876,  8,576,010.  Seven  years  of  the  decade  here  inferred  to,  that  is 
to  say,  from  1866  to  1873,  inclusive,  were  regarded  as  a  period  of 
great  prosperity ;  there  was  abundant  employment  for  labor,  enter- 
prise was  active,  wages  were  good,  all  kinds  of  business  were  brisk, 
prices  were  stiff  and  profits  were  large.  And  yet,  this  was  not  a 
period  of  prosperity,  as  we  now  know ;  what  we  took  for  prosperity 
was  a  simulation;  we  weie  increasing  our  indebtedness  and  taxes 
faster  than  we  wi-re  increasing  in  wealth — and  a  very  large  propor- 
tion of  the  mass  of  ti-ansactions  that  we  called  business  was  merely  the 
multiplication  of  debts.  Since  1873,  everything  in  the  country  in 
the  shape  of  property  has  shrunk  in  value,  except  debts  and  the 
anoney  they  are  payable  in ;  lands,  houses,  ships,  steamboats,  rail- 


THE  PRESENT  CRISIS.  303 

roads,  farm  property,  manufactories  and  labor  have  dwindled  to  half 
the  value  they  bore  iu  18GG,  but  the  debts  remain  the  same." 

Ex-Gov.  Ilardiu  suid  8tli  Jauuary,  1878  : 

•'  Although  the  newspapers  continually  talk  about  times  changing, 
and  the  real  e>tate  ageuts  insist  that  laud  is  going  up,  yet  I  can  see 
no  change  for  the  better.  Everything  seems  dead ;  all  kinds  of  busi- 
ness is  stagnant;  soniethin;r  must  be  done  at  once  to  revive  business 
and  awaken  our  business  men  to  the  importauco  of  enterprise." 

New  York  Times  oa  miners  : 

"  What  shall  be  done  to  miiigate  the  miseries  of  the  starving  min- 
ing population  iu  the  distiict  of  which  Scranton  is  the  center? 
There,  as  at  Pittsburg  and  other  places,  a  vicious  Hscal  system  has. 
brouglit  together  vast  bod  es  of  working  people,  who  are  now' 
thi'owu  helpless  upi)u  the  world.  The  coal  companies,  great  and 
small,  profited  by  the  industrial  inflation.  They  bought  coal  lands 
at  high  prices.  They  opened  mines,  which,  for  a  time  yielded  tlu-m 
princely  revenues.  Tiiey  divided  large  profits,  added  to  their  capi- 
tal, and  forced  the  developin.'ut  of  their  properties.  To  carry  on 
their  works,  they  brought  together  miners  from  Europe  to  an  extent 
far  in  excess  of  the  le^iiiniaien'qiiirements  of  trade.  They  imported 
them  fn)m  Wales,  from  the  North  of  Eughiud  from  Ireland,  tempting 
them  with  promise  of  hitih  wanes  and  lasting  employment.  Can  it 
be  pretended  that  these  corp  >rations  have  no  responsibility  in  these 
premises?— that  they  may  cut  down  wages  to  starvation  point,  or 
suspend  work  altogether,  without  further  care  for  those  whom  they 
took  thither  with  expectations  that  have  not  been  fultilled?  Moral 
responsibility  there  certainly  is,  but  that,  unfortunately,  does  not 
admit  of  practical  application.  It  is  not  sullicieut  to  say  that  the 
companies  have  been  working  at  a  loss.  In  the  peculiar  circum- 
stances of  the  case,  they  owe  m  )re  to  their  men  than  the  stern  eco- 
nomic law  exacts.  Exac'Iywhat  their  obligation  is,  and  how  it 
should  be  fulfilled,  are  que-ti(nis  which  in  view  of  their  great  suffer- 
ing cannot  always  remain  unmswered  The  Old  World  no  longer 
faces  alone  the  labor  problem.  It  is  here,  and  it  presses  for  a  solu- 
tion.       *        ♦        * 

"  The  plain,  unvarnished  tale  supplied  by  our  special  correspon- 
dent now  among  the  Peiuisylvania  miners  cainiot  be  read  with  in- 
tiifference  by  any  just  or  humane  man.  We  speak  of  'hard  times' 
"When  it  becomes  necessary  to  forego  some  luxury,  to  deny  ourselves 
some  familiar  jilea^ure,  ami  to  reduce  our  general  standard  of  ex- 
penditure. We  complain  wh  n  pinched  to  keep  up  appearances,  and 
repine  at  the  hardship  which  invades  our  comfort.  In  and  around 
the  coal  fluids  of  an  adjoining  State,  however,  are  tens  of  thousands 
of  workinf)  men,  icho,  xcith  theirfamilles,  are  on  the  verge  of  starva-  j 
tion.  A  large  proportion  are  unemployed ;  ^/lose  ^/iii /((/re  irorA",  are  *■ 
paid  so  scantily,  that  ichat  thetf  earn  barely  keeps  soul  and  body  togeth' 
er  The  picture  of  squalor  and  wretchedness,  of  hunger  and  naked- 
ness, is  shocking  enough  to  touch  the  hardest  lieart.  It  is  made  more 
painful  by  the  fact  that  some  of  the  companies  add  to  the  miseries 
of  their  people  by  tlie  enforcement  of  the  truck  system.  There 
may  be  reasons  for  suspending  work  iu  some  cases,  and  for  reduc- 
ing wages  iu  others,  but  the  greed  which  prompts  employers  of  labor 


304       MONETARY  HISTORY  OF  THE  UNITED  STATES  : 

to  squeeze  out  of  it  the  beggarly  pittance  through  the  agency  of 
store-pay  admits  of  no  excuse.  It  is  an  infamy,  which  the  law  in 
other  countries  has  suppressed." 

The  utterances  of  Secretary  Sherman,  when  he  was 

U.  S.  Senator,  in  1869  :  . 

"  The  appreciation  of  the  currency  is  a  far  more  distressing  opera- 
tion than  Senators  suppose.  Our  own  and  other  nations  have  gone 
through  tliat  process  before.  *        *        *         For  eighteen  years, 

(previous  to  1821)  the  notes  of  the  Bank  of  England  were  practic- 
ally a  legal  tender,  and  upon  them,  as  upon  our  greenbacks,  was 
based  a  currency  issued  by  the  country  banks.  When  tho  war  (with 
Napoleon)  was  over,  measures  were  slowly  adopted  for  the  appreci- 
ation of  the  paper  currency  to  the  gold  standard  It  is  only  neces- 
sary to  appeal  to  the  histories  of  the  time  to  show  the  disastrous  ef- 
fects. Small  traders,  debtors  and  laborers  weie  reduced  to  the 
sorest  distress.  The  loss  to  them  was  far  greater  than  the  actual 
appreciation  of  the  currency, /yr  a/Z  coHMe«ce  a«d  trust  were  lust. 
The  only  compensation  to  Great  Britain  ivas  the  rapid  fall  in  the  rate 
of  interest,  from  the  abundance  of  idle  capital,  and  her  ability  to  reduce 
the  rate  of  interest  on  her  public  debt  within  a  short  period  to  three  per 
cent.  If  Senators  wish  other  examples  of  the  severe  process  or  pass- 
ing from  a  depreciated  currency  to  a  currency  convertible  into  gold, 
let  thein  read  the  story  of  the  times  after  the  Revolution,  and  after 
the  war  of  1812,  and  after  the  revulsion  of  1837.  all  of  which  were 
periods  of  transition  from  a  depreciated  to  a  convertible  cuireucy. 

*'  It  is  not  possible  to  take  this  voyage  without  the  sorest  distress.  To' 
every  person  except  a  capitalist  out  of  debt,  or  a  salaried  officer  or  aa- 
nuitant,  it  is  a  period  of  loss,  danger,  lassitude  of  trade,  fall  of  wages, 
suspension  of  enterprise,  bankruptcy  and  disaster.  To  every  railroad 
it  is  an  addition  of  one-third  to  the  burden  of  its  debt,  and  more  than 
that,  deduction  from  the  value  of  its  stock.  It  means  the  ruin  of  all 
dealers  whose  debts  are  twice  their  (business)  capital,  though  one- 
third  less  than  their  actual  property.  It  means  the  fail  of  all  agri- 
cultural product  ions  without  any  great  reduction  of  taxes.  Wliat  pru- 
dent man  would  dare  to  build  a  house,  a  railroad,  afactory  ora  barn, 
with  the  certain  fact  before  him  that  the  greenbacks  he  puts  into  his 
improvement  will,  in  two  years,  be  worth  thirty-tive  per  ci  nt,  more 
than  his  improvement  is  then  worth?  Why  not  hold  his  money  for 
two  years  until  his  building  will  cost  him  one-third  less?  When  the 
day  comes,  every  man,  as  the  sailor  says,  will  be  close  rei  fed;  all 
enterprise  will  be  suspended;  every  bank  will  have  contracted  its 
currency  to  the  lowest  limit,  and  the  debtor,  compelled  to  m>  et  in 
coin  a  d  bt  contracted  in  currency,  will  find  the  coin  honrded  in  the 
Treasury,  no  representative  of  coin  in  circidatiim,  his  property 
shrunk,  not  only  to  the  extent  of  the  ajipreciition  of  the  currency, 
but  still  more  by  the  artificial  scarcity  made  by  the  hoarders  of  gold. 
To  attempt  this  task  by  a  surprise  I'poii  our  people,  by  arresting 
them  in  the  midst  of  their  lawful  business  and  applying  a  new  standard 
of  value  to  their  propn-ty,  loithout  any  reduction  of  their  debts^  or  giv- 
ing them  an  opportunity  to  compound  loith  their  creditors  or  to  distri- 
bute their  losses,  would  be  an  act  of  folly  without  example  in  evil  in 
modern  time!  " 


TIIE   PRESENT    CRISIS.  305 

"Onio  Railroads. — In  Ohio  there  are  fifty  railroads,  eTclnsive 
of  the  narrow-iiauge  roads— eight  of  which  did  not  paj- their  ruuniug 
expenses  during  the  year  1875.  Thirt»-eu  paid  no  interest  on  tlieir 
bonded  indebtedness.  Seven  are  in  the  hands  of  receivers.  The 
gross  receipt  of  these  roads  for  187tJ  amounted  to  S34  119,04".»,  while 
the  operatinii  expenses  were  824,404,505,  leaving  89,714,484.  Tlie 
total  cost  of  these  roads,  including  all  debts,  was  8317,222,232  show- 
ing tluit  the  net  earninirs  are  a  tntle  over  three  per  cent,  of  the  in- 
vested capital.  The  total  bonded  indebtedness  of  these  roads  is 
^100,000,000  all  of  which  bear  six  per  cent,  interest  or  more,  so 
that  the  net  earnings  will  not  be  sutticient  to  pay  tlie  interest  on  the 
bonded  debt  and  leaving  nothing  for  the  millions  invested  by  stock- 
holders, of  which  tliere  are  1  7,000.  Il  this  is  tlie  result,  railroad  in- 
vestments in  Oliio,  the  leading  State  in  agricultural  products,  with 
growing  manufacturing  enterprises  and  coal  and  iron  in  abundance, 
what  mu-t  be  the  condition  of  railroad  property  in  less  populous 
and  favored  States?  " 

"  Hard  Times  for  Railways. — Some  facts  are  gathered  by  Chi- 
cago liaihcaij  Aije,  regarding  the  foreclosure  of  mortgages  on  Ameri- 
can railways  durinsr  the  year  just  ended.  It  appears" that  the  actual 
sales  undi-r  foreclosures  cover  3,875  miles  of  road,  with  bonds  and 
debt  of  SlUt, 938, 7(10.  and  capital  stock  of  879  045,700.  The  capital 
stock  is  practically  rendered  valueless  by  foreclosure,  and  mortgaires 
later  than  the  first  generally  go  the  same  way,  so  that  it  is  probable 
that  the  proceedinus  recited  above  involve  a  net  loss  of  not  less 
than  a  hundred  millions  of  dollars.  In  addiiion  to  this  there  have 
been  (>rd(.-red  sold,  but  not  yet  brought  to  the  hauinier,  2,388  miles 
of  road,  \vi  h  8128,833,400  of  bonds'^and  floating  debt,  and  8126,021,- 
900  of  c.ipital  stock  ;  and  in  these  cases  the  sales  involve  a  loss  of 
rot  less  than  8150,000,000.  In  the  preceding  year  sales  were  made 
of  8,846  miles  of  road,  with  8218  000,000  ofdvbt  and  capital,  so 
that  ic  is  not  unreasonable  to  set  down  the  shrinkage  of  railroad 
property  involved  in  the  cases  of  these  two  years  at  8350,000,000. 
The  end  is  not  yet  but  it  is  generally  believed  to  be  near,  and  the 
10,000  miles  or  more  of  mad  involved  in  the  above  statistics  may, 
as  a  rule,  be  rcirarded  as  reduced  to  'hard  pan,'  and  ready  to  do  fair 
wi>rk  at  reasonable  profit  for  their  present  owners."— ..Veio  York 
Times. 

"  Decline  of  Raii.road  E.vrxivgs.— The  New  York  Financial 
Chronicle  gives  a  table  showing  the  earnings  of  twent\'-two  leading 
railroads  for  the  yt-ar  1877  (with  the  exception  of  the  last  week  in 
December).  Their  gross  earnin<rs  were  867,712, 196.  For  the  pre- 
ceding yvar  they  were  878,189,781.  The  decrease  has  been  only 
$477,585.  All  the  roads  referred  to  do  not  show  an  increase;  the 
incna.^e  of  those  which  have  gaineil  is  $2,000,728;  and  the  decrease 
of  tho.se  that  have  lost  is  82,478  313— leaving  the  net  decrease  84 77,- 
585.  The  roads  that  show  an  increase  are  those  running  west  and 
southwest  Irom  St.  Louis.  The  increase  in  the  earnings  of  the  St. 
Louis,  Iron  Mtiuntain  and  Southern  was  8494,173;  that  of  the  Miss- 
ouri r.:citic  w.is  8139,730  :  that  of  the  Kansas  Pacific  was  8288,911 ; 
that  of  the  Denver  and  Rio  Grnnde  was  8311,433.  The  great  trunk 
lines  leading  from  New  York  and  Boston  to  the  West  show  a  decline. 
The  gross  earnings  of  the  New  York  Central  were   §26,579,085  for 


306     MONETARY    HISTORY    OF    THE    UNITED    STATES: 

1877,  and  $28,046,588  for  187G;  those  of  the  Lake  Shore  and  Michi- 
gan Southern  were  $13,214,434  for  1877,  and  $14,417,020  for  1876; 
those  of  the  Erie -were  $14,708,887  for  1877,  and  $15,852,461  for 
1876;  those  of  the  Boston  and  Albany  were  $6,762,147  la  1877,  and 
$7,074,758  in  1876." 

Hon.  Britton  A.  Hill,  in  his  preface  to  Absolute  Money  y 

page  9 ,  says  : 

'The  financial  prosperity  of  this  country  never  was  so  general,  and 
commercial  failure  never  touched  so  low  a  figure  as  during  the  years 
1863-67,  when  the  volume  of  our  currency  was  at  its  higliest.  Then 
the  effects  of  Secretary  McCulloughs  policy  of  contraction  began 
to  be  felt;  and  what  has  been  the  resuit?  A  gradual  increase  of 
commercial  failures  at  a  rate  simply  frightful  to  contemplate,  and  a 
general  paralysis  of  every  business  enterprise  which  culminated  in 
the  great  crash  of  1873.  The  building  of  railroads  has  been  stopped, 
our  factories  are  clo>ed,  our  commerce  is  languishing,  our  laborers 
are  out  of  employment,  and  the  tide  of  immigratiou  fiom  Europe 
has  been  checked  by  the  reports  of  our  financial  distresses;  and  the 
reason?  There  is  work  ennuirh  to  be  done,  resources  enough  to  be 
developed,  and  not  only  enough,  but  rather  too  many  for  the  instru- 
ment wherewith  to  operate :  Money.  We  want  a  large  lever  for 
the  work  before  us — a  great  amount  of  money  wherewith  to  under- 
take our  enterprise  again  " 

Hon.  J.  A.  Dacus,  AnnaU  of  the    Great  /Strike  of 

1877,  savs : 

"Republican  government  in  this  country  has  just  been  subjected  to 
a  strain  greater  than  any  which  our  system  has  been  before  required 
to  sustain.  It  is  true,  that  great  armies  were  not  organized  to  meet 
in  the  shock  of  battle  as  in  the  civil  war  between  tlie  North  and 
South.  Nor  were  powerful  sections  arrayed  against  each  other. 
But  the  phase  assumed  l)y  the  recent  conflicts  are  far  more  threaten- 
ing to  social  organization  and  political  stability  than  was  the  terrible 
contest  waged  between  sections  from  1861  to  1865.  In  that  collis- 
ion, the  North  represented  the  idea  of  tlie  organic  unity  of  the 
several  States  of  the  Federal  Government,  tlie  South  the  idea  of 
State  Sovereignty;  but  both  represented  the  principles  of  social  or- 
der, and  contended  for  the  reigu  of  law.  But  we  have  witnessed  an 
uprising  of  no  mean  magnitude,  which  represented  nothing  in  com- 
mon with  the  fundamental  principles  of  republican  institutions. 

'  The  history  of  the  great  strike  of  1877  affords  material  for  thought, 
a  basis  for  the  most  profound  reflections 

"The  causes  which  produced  the  results,  so  startling  to  the  friends 
of  liberal  institutions,  have  not  ceased  to  operate,  and  as  a  conse- 
quence the  records  of  tlie  events  conn.cted  with  the  inception,  pro- 
gress and  culmination  of  the  disorders  must  prove  to  be  an  inter- 
esiing^tudy  to  all  thinking  minds.  The  very  foundations  of  American 
socifty  have  been  disturbed;  the  whole  political  structure  has  been 
made  to  sway  to  antl  fro,  as  if  about  to  be  overthrown. 

"The  sirength,  tiie  fearful  power,  which  stopped  the  wheels  of 
commerce,  closed  the  marts  of  trade,  and  threatened  to  engulf  all 
Wealth,  institutions,  social  organization,  everything,  in  the  vortex 


THE  PRESENT  CRISIS.  307 

of  ruin,  was  not  the  offsprins;  of  a  conspiracy,  was  not  generated  by 
elaborate  planuinj^,  and  did  not  resull  from  mature  deliberation. 
And  in  this  very  fact,  tlie  man  of  calm  reflection  discovers,  not  far 
aliead,  the  rocks  on  which  the  ship  of  States  is  likely  to  be  driven — 
on  which  every  hope  of  mankind  may  be  wrecked.  If  it  had  been  a 
deliberately  planned  and  concerted  movement,  if  those  enji;aged  iu 
it  had  exhibited  evidence  of  organizaiioii,  then  its  failure  would  have 
given  a  better  promise  of  enduring  peace  and  order  But  the  spon- 
taneity of  the  movement  shows  the  existence  of  a  wide-spread  dis- 
content, a  disposition  to  .subvert  the  existinij  social  order,  to  modify 
or  overturn  the  political  institutions,  under  which  such  unfavorable 
conditions  were  developed.  Somewlieie  there  must  be  something 
radically  defective,  either  in  the  system  or  in  the  manner  of  its  con- 
trol. Such  spontaneous  demonstrations  by  l.-irsie  masses  of  the 
people,  as  have  been  witnessed  in  ttie  United  States  in  the  year 
1877,  do  not  take  place  without  a  sufficient  cause.  To  discover  that 
cause  and  take  measures  for  its  removal  is  one  of  the  first  and  most 
Important  duties  required  of  the  patriotic  citizen. 

"Never  before  in  this  country— perhaps  iu  no  other  counti'y  la 
the  world — has  so  vast  a  number  of  men  taken  part  in  riots  and 
strikes  for  increased  wages.  It  was  an  impulsive,  perhaps,  an  im- 
prudent outburst,  and  certainly  it  was  characterized  by  violence  and 
lawlessness,  that  cannot  be  palliated  or  excused.  The  supremacy 
of  the  law  is  an  essential  condition  of  social  order,  the  right  to  pri- 
vate propertj',  the  right  to  personal  security  cannot  be  assurefl  with- 
out it.  Social  disorganization  means  political  death.  With  the 
reign  of  anarchy  commence  the  miseries  of  the  people  without  dis- 
tinction of  class.  In  the  thi'oes  of  expiring  societj',  all  alike  become 
victims. 

"But  social  discords  cannot  take  place  in  the  midst  of  a  prosper- 
ous community.  The  alarming  movements  of  the  present  year  are 
the  logical  results  of  the  condition  of  society.  They  are  but  eviden- 
ces of  deep  suHerings  among  a  large  class  of  the  people  of  this  coun- 
try. Somewhere  great  wrongs  have  been  committed,  and  society 
must  pay  the  pentlty  for  crimes  The  study  of  tlie  natural  causes 
that  govern  the  rate  of  wages,  is  a  study  of  the  causes  tliat  di.'-trib- 
ute  wealth  to  the  mass  of  mankind.  Capitalists  cannot  afford  to 
oppress  laborers,  because  such  oppression  endangers  their  own  se- 
curity. 

"But  neither  government  nor  social  order  can  be  maintained  when 
the  majority  of  tiie  people  are  homeless  and  hopeless.  The  poor 
num's  hopes  are  the  rich  man's  protection.  The  condition  of  Mex- 
ico may  be  cited  as  an  illustration  of  the  position  here  taken.  A 
country  containing  a  population  of  upwards  of  nine  millions  of  souls 
Is  owned  by  lehS  than  a  luuulred  thousand  proprietors.  What  has 
been  the  result  of  this  ill-distribution  of  wealth?  The  answer  is, 
fifty  years  of  anarchy.  The  poverty  of  the  masses  is  fatal  to  the  se- 
curity of  the  wealthy  proprietors  " 

The  New  York  Sun,  October,  1877  : 

"City  Real  Estate — Some  of  our  contemporaries  have  of  late 
painted  the  future  of  New  York  real  estate  in  very  rosy  colors,  but 
the  man  who  owns  mortgaged  property  and  is  compelled  to  realize 


308       MONETARY  HISTORY  OF  THE  UNITED  STATES 


or  go  under,  takes  comparatively  very  little  interest  in  the  probable 
prospective  value  of  the  property  one,  two,  or  three  years  hence. 

"That  real  estate,  as  a  general  tiling,  is  now  very  firmly  held,  and, 
except  in  the  case  of  weak  holders,  not  pressed  for  sale  at  going 
rates,  is  universally  admitted.  Duriugthe  past  four  years  enor- 
mous quantities  of  real  property  have  been  sold  at  foreclosure  sales. 
It  has  mostly  gone  into  the  bauds  of  mortgagees,  at  prices  utterly 
ruinous  to  the  owner  of  the  fee.  Property  so  bought  pays,  if  im- 
proved, from  ten  to  twelve  per  cent,  net  on  the  investment  Where 
unimproved,  and  situated  in  choice  locations  in  the  building  dis- 
trict, it  can  even  now  be  sold  at  a  handsome  profit  to  speculative 
builders,  who  are  again  in  the  market  as  buyers. 

"The  whole  area  from  Sixty-fourth  to  Eighty-sixth  street,  between 
Madison  and  S;,'Cond  avenues,  is  being  ripidiy  covered  with  bicks 
and  morrar,  and  presents  a  scene  of  great  activity.  Capita. ists  are 
buying  lots  in  this  district  from  weak  holders  at  from  33)^  to  59  per 
cent,  less  than  they  cost  six  years  ago,  the  owners  having  in  the 
meantime  lost  interest  and  paid  taxes.  In  most  cases,  these  buy- 
ers sell  immediately  at  a  considerable  advance  to  speculative  build- 
ers, making  a  building  loan,  which  is  paid  in  installments  as  tiie 
building  progresses.  Those  capitalists,  backed  by  shn-wd  lawyers, 
who  have  of  late  turned  their  attention  to  this  matter  of  buying  lots 
low  for  cash  and  reselling  them  with  a  loan,  have  found  the  business 
more  lucrative  than  any  o  her  safe  mode  of  investment  or  spec- 
ulation. It  is  simply  a  way  of  investing  money  on  first  bond  and 
mortgage  at  seven  per  cent.,  with  the  additional  profit  gained  on  the 
sale  of  the  lots." 

Hon.  Mr.  Haymand,  of  Indiana,   said  in   Congress, 
April  1st,  1876: 

"  The  President  of  the  Uuited  States  in  his  last  mes«age  has  rec- 
ommended Hhat  the  Secretary  of  the  Treasury  be  authorized  to  redeem, 
say,  not  to  exceed  $2,000,000  monthly  of  the  legal  tender  notes,''  and 
bills  have  been  introduced  in  both  Houses  of  Congress  advocating 
a  similar  policy  with  the  view  of  hastening  resumption;  yet  with  a 
contraction  amounting  practically  to  $2,000  000  per  month,  and 
without  the  expenditure  of  a  single  dollar  in  gold,  we  chronicle  the 
result,  namely,  an  increase  of  about  3  per  cent,  in  the  gold  premium. 
During  this  period  our  financial  troubles  have  increased  instead  of 
being  diminished;  trade  and  commerce  have  been  in  a  more  lan- 
guishing condition  than  any  time  since  the  panic;  the  industrial  and 
mechanical  pursuits  of  the  country  have  been  ptiralyzed;  enterprise 
and  improvements  have  been  suspended  or  discouraged;  and  thous- 
ands and  tens  of  thousands  of  people,  dreading  the  legitimate  con- 
sequences of  the  policy  inaugurated,  are  trembling  on  the  brink  of 
bankruptcy.  While  contraction  has  been  going  on  and  our  financial 
troubles  thickening,  resumption,  like  the  \V  ill-o'-the  wisp,  has  flitted 
ahead  only  to  delude,  and  we  are  as  far  from  the  realization  of  this 
hope  as  we  were  a  year  ag  >. 

"By  this  policy  we  are  not  only  piling  up  an  enormous  indebted- 
ness, Mike  Pelion  upon  Ossa,'  to  consume  the  vitality  of  the  nation 
and  entail  perpetual  burdens  upon  the  people,  making  them  hewers 
of  wood  and  drawers  of  water  to  the  moneyed  aristocracy  of  the 


THE   PRESENT   CRISIS.  309 


world,  but,  worse  even  than  this,  it  leads  to  the  assumption  that 
the  legal  tender  currency  of  tliis  country,  the  boasted  money  of  the 
realm,  based  upon  the  faith  and  credit  of  the  nation,  is  a  greater 
evil  tlian  the  interest-bearing  indebtedness,  which  we  now  seek  to 
increase,  and  wiiich  has  already  attained  colossal  proportions. 

"We  had  a  panic  three  years  ago  that  swept  over  the  land  like  a 
pestilence,  and  yet  before  its  shadow  has  passed  over  the  horizon, 
and  coiitidence  has  been  restcred,  the  whole  country  is  again  pre- 
cipitated in  worse  confusion  by  a  species  of  legislation  that  attempts 
hastily  and  out  of  season  to  cramp  and  crush  the  business  of  the 
country  down  to  a  specie  basis." 

From  a  speech  of  Hon.  Britton  A.  Hill,  reported  in 

the  St.  Louis  Times,  of  November  13th,  1877  : 

*•  The  pcop'e  and  their  governments,  municipal,  State  and  Federal, 
are  rapidly  drifting  into  bankruptcy  and  lawlessness,  under  the 
fraudulent  system  of  money  contraction  and  specie  resumption 
adopted  by  Congress  in  18(i9,  1870  and  1875,  which  is  relentlessly  re- 
ducing our  traders,  manufacturers,  mechanics  and  workiugmen  to 
distress  and  starvation.  In  the  midst  of  peace,  with  abundant 
harvests,  overflowing  granaries,  and  a  foreign  war,  creating  a  strong 
demand  for  all  our  supplies  and  products,  tiie  workingmen,  mechan- 
ics and  tradesmen  are  crying  for  bread.  Misery,  poverty  and  want 
in  the  midst  of  plenty  appear  everywhere,  as  I  predicted  would  be 
the  case  in  1869,  1873  and  1875,  if  the  gold  basis  and  the  money  con- 
traction were  to  be  forced  upon  the  people  by  the  bondholders. 
The  acts  of  Congress  of  18(;9  and  1870,  changing  the  greenback 
bonds  into  gold  bonds,  and  the  subsequent  acts  for  the  destruction 
and  redemption  of  the  people's  greenbacks  in  gold,  have  brought 
this  present  ruin  upon  the  workingmen,  traders'aud  mechanics,  and 
even  upon  the  farmers,  in  spite  of  their  fair  crops. 

From  a  letter  of  Hon.  J.  A.  Dacus,  in  the  Missowi 

Republican,  November  17th,  1877  : 

*  Now  let  us  consider  some  of  the  recent  social  developments 
in  our  own  country.  Some  forty  years  ago  Thomas  H.  Benton,  in 
a  speech  in  the  United  States  Senate,  declared  that  'a  republic  does 
not  want  landlords  and  tenants.'  As  yet  hurtful  as  the  existence  of 
such  relations  may  be  to  the  peace  of  society  and  the  stability  of 
government, facts  prove  that  the  tendency  in  that  direction  is  alarm- 
ingly rapid.  Statistics  show  that  the  increase  of  pauperism  to  the 
ratio  of  the  increase  in  population  is  as  78  t )  45,  hence  the  appear- 
ance of  that  ubiquitous  wanderer,  the  'tramp.'  He  is  here,  there, 
everywhere,  in  the  city,  in  the  country,  wherever  there  are  inhabit- 
ants Now,  why  is  he  abroad?  Where  did  he  come  from?  What 
caused  him  to  come?  Vv  hy  has  he  an  existence  at  all?  The  coun- 
try is  not  overpopulate,  there  are  yet  vast  flelds  to  be  opened  and 
tilled,  there  is  yet  much  room  for  the  erection  of  homes,  and  many 
indu-tries  to  be  developed.  All  these  are  undeniable  facts.  And 
yet  the  proportion  of  people  who  have  no  homes  is  steadily,  cer- 
tainly growing  larger. 

'•To  be  without  a  home,  and  without  the  hope  of  acquiring  one, 


310     MONETARY   HISTORY   OF   THE   UNITED    STATES  .* 

is  to  be  placed  in  a  situation  devoid  of  motives  to  eitVier  labor  or 
exercise  self-command.  The  laborer  who  possesses  properly, 
though  he  be  unable  to  either  read  or  write,  possesses  an  educated 
mind.  He  has  forethought,  caution  and  influence  guiding  every  act- 
ion;  he  knows  the  value  of  r  straint,  an  1  is  in  the  constant  habitual 
practice  of  it.  The  day  laborer,  who  is  n)t  the  owner  of  anything, 
on  the  other  hand,  is  almost  always  improvident;  he  is  generally 
content  to  live  from  hand  to  mouth  It  is  no  blind  instinct  that  at- 
taches the  idea  of  respectaljility  to  the  possession  of  property.  It 
gives  the  owner  a  locus  stantli  in  society,  generates  a  feeling  of  self- 
respect,  establishes  a  standard  which  c  tuluces  to  and  gives  a  claim 
to  outward  respect.  But,  on  the  one  hand,  too  large  possessions 
often  create,  out  of  self-respect,  self-conceit  and  a  disregard  of  the 
happiness  of  others;  it  is  the  comparaiive  poor  who  must  feel  for 
and  assist  the  poor,  while  a  too  minute  subdivision  of  property 
might  lead  to  an  equally  lamentable  ri^sult  by  fost^  ring  the  senti- 
ment and  developing  selfish  feelings  from  an  opposite  quarter.  The 
benefactions  of  2.5,000  persons,  each  owning  S2,000,  fairly  estimated 
at  $20  each,  would  Lj  $500,000,  a  sum  irreater  than  Vanderbiit  ever 
bestowed  in  any  one  year,  thouirh  repuluvi  to  be  tne  possessor  of  a 
much  larger  amount  than  the  ag::regate  fortunes  of  the  25,000  men 
in  moderate  circumstances.  The  millions  acquired  by  Vanderbiit 
during  a  life-time  were  equal  to  the  aggregate  fortunes  acquired  in 
a  life-time  by  no  less  than  i/ur^;/  thousand  lionest,  industiious  and 
prudent  laborers  under  our  existing  sy^um.        *        ♦        * 

"  The  social  problem  forced  upon  the  attention  of  the  American 
people  by  recent  events  cannot  be  solved  wituout  a  consideration  of 
the  causes  which  have  produced  he  disease  in  our  country  Mere 
expedients  will  not  answer.  Any  plan  calculated  to  lower  the  opin- 
ions and  lessen  the  self-respect  of  men  arc  ol)jectionable.     *      *      * 

*'  It  would  be  a  fatal  mistake  to  encourage  men  to  become  con- 
tented with  their  lot;  and  it  would  be  impossible  to  carry  out  even 
so  mild  a  plan  as  that  suggested  by  Dr.  Elior,  without  detracting 
somewhat  Irom  the  independence  and  manhood  of  some  one  who 
might  be  forced  by  a  necessity,  produce  1  by  misfortune,  to  become 
a  temporary  slave  in  order  to  preserve  Hie.  That  man  who  is  once 
forced  to  labor  for  a  scanty  support  only,  is  not  likely  to  gain  in  self- 
respect,  and  may  readily  accept  his  fate  and  become  a  permanent 
charge  upon  society.  Men  must  have  hope  in  lite  to  be  good  citi- 
zens of  a  republic.  Make  labor  hopeless  and  you  make  it  danger- 
ous. Place  the  unfortuntite  wanderer  under  the  direction  of  an 
overseer  backed  by  the  authority  of  the  government,  and  his  in- 
dividuality and  manhood  are  at  once  d  stro.ved  *         *        * 

"  The  collapse  of  credits  in  1873  indiced — we  will  not  say  com- 
pelled— the  employers  of  laborers  to  attempt  to  maintain  their  own 
revenues  by  curtailing  the  wau:es  of  em  doyecs.  This  course  caused 
a  shock  to  the  whole  labor  s\  stem  of  the  country,  and  great  num- 
bers of  the  working  people,  unaole  to  (lesc<  nd  at  once  to  the  stand- 
ard which  the  redu^  lion  in  their  income  imposed,  sought  in  other 
fields  of  effort  to  retrieve  their  fortunes.  They  became  tramps  in 
search  of  work.  The  general  depression  in  all  departments  of  in- 
dustry caused  a  failure  of  their  projects  for  improving  their  con- 
dition hope  expired,  and  many  honest  men  have  become  wanderers — 
and  some  that  were  honest  before  have  become  thieves." 


THE  PRESENT  CRISIS.  311 

From  a  speech  of  the  Hon.  Thomas  T.  Crittenden, 
in  Congress,  Nov.  IGth,  1877: 

"In  tlie  language  of  Edmund  Burke:  *It  is  to  the  property  of 
the  citizen,  and  not  to  tlie  d^'uiauds  of  the  creditor  of  the  state,"  that 
tlic  original  faith  of  sock-ty  is  pjeilged.  The  claim  of  the  citizen  is 
prior  in  time,  paramount  in  title,  superior  in  equity.' 

"What  has  ])een  the  efl'ect  of  this  resumption  law  upon  the  finan- 
ces and  business  of  the  country?  It  was  passed  at  a  time  when  the 
country  was  in  disties-;,  as  a  measure  of  relief.  It  was  said  by  its 
friends  that  it  would  not  contract,  but,  under  the  free-coiuage  and 
free-banking  sections,  it  would  gradually  increase  the  currency. 
Has  tliat  been  so?  Let  us  see.  On  the  14th  January.  1875,  the  date 
of  the  passage  of  the  resumption  act,  there  were  outstanding  in  legal 
tender  notes,  ^382,000,000;  in  national  bank  notes,  $!34y,8"J-i,  182 ; 
total,  $731,894,182.  On  the  3d  November,  1877,  there  were  out- 
standing in  legal  tender  notes,  $354, 490, 992;  of  national  bank  notes, 
$316,775,111;  total,  $(!71,266,103 ;  being  a  reduction  in  legal  tender 
notes  of  $27,509,108;  in  national  bank  notes,  $35,086,339;  total, 
$62,595,447. 

"And  this  is  not  all  the  promised  blessings  of  that  law.  Besides 
the  contractions  above  mentioned,  others  have  followed  in  their 
tracK.  Nine  millions  of  dollars  of  legal  tenders  have  been  held  in 
the  Treasury  Department  with  which  to  redeem  the  outstanding 
fractional  currency,  supposed  to  be  worn  out  or  burned,  which  sum 
of  course  is  permanently  retired,  and  $13  000,000  of  legal  tender 
notes  are  also  held  in  the  Treasury  Department  for  the  consummation 
of  the  withdrawal  of  national  banknotes  now  in  the  process  of  re- 
tirement; to  which  also  add  $22, 144,000  of  fractional  currency  which 
has  been  retired  and  lis  place  not  tilled  by  the  subsidiary  silver  coins 
of  fi  ty,  tw(  nty-five,  twenty,  ten,  and  five  cent  pieces,  making  in  the 
aggregate,  iu  round  numbers,  $107,000,000  of  absolute  contraction, 
and,  too,  at  a  time  when  money  is  in  great  demand. 

''Since  the  resumption  law  went  into  operation  in  1875,  this  coun- 
try, North,  South,  East,  and  West,  has  been  blessed  with  the  most 
prolific  crops,  exporting  annually  over  one  hundred  million  bushels 
of  wheat  alone.  Europe  has  been  more  or  less  in  a  disturbed  con- 
dition, two  of  its  grand  powers  actually  engaged  in  armed  hostility, 
one  of  which  b(  ing  the  only  formidable  competitor  that  our  country 
has  had  in  wheat  in  the  markets  of  the  world,  our  exports  annually 
exceed  ng  our  imports  by  $200,000,000.  And  yet  in  the  midst  of  all 
this  we  are  in  the  nndst  of  bankruptcy,  sorrow,  aiul  maddening  dis- 
tress. Il  is  an  anomaly  that  sets  at  defiance  all  theories  of  contrac- 
tionists,  all  fine-spun  ideas  of  these  latter-day  financial  saints: 
Millions  of  idle  men,  women,  and  children,  in  the  presence  of  the 
most  ^lupendous  crops  of  cereals,  cotton,  hay,  and  toba<-co  that  ever 
loaded  !ind  graced  any  soil  under  the  sun.  With  the  enactment  of 
this  resumption  law  and  such  crops,  -these  wise  men  of  the  East' 
said  peace  and  prosperity  would  abound.  In  the  language  of  one  of 
old  I  say  to  them  : 

"Ye  are  forgers  of  lies,  ye  are  all  physicians  of  no  value." 


312      MONETARY  HISTORY  OF  THE  UNITED  STATES  : 

From  a  letter  by  an  able  writer  in  the  St.  Louis 
Times,  of  October  20th,  1877  : 

"The  depreciation  in  the  value  of  real  estate  throughout  the  Union  is 
Tiniversally  conceded  to  have  been  not  less  than  30  per  cent.,  which, 
upon  the  census  valuation  of  1870,  amounts  to  S3  000  000,000. 

"The  loss  by  the  cessation  of  nearly  all  the  industries  of  the  coun- 
try, and  the  shrinkage  in  value  of  stocks,  bonds  of  railroads,  and 
other  corporations,  cannot  accurately  be  ascertained  ;  but,  including 
all  other  personal  property  which  has  suffered  diminution  in  value, 
it  has  been  estimated  by  experts  at  not  less  than  $5,000,000,000. 

"Bank,  savings  institutions,  and  insurance  companies  which  have 
heretofore  stouil  high  in  the  public  confidence  have  been  compelled, 
by  reason  of  the  enormous  shrinkage  in  the  values  of  all  securities 
and  the  disasters  which  have  overtaken  their  customers,  to  suspend 
aud  go  into  liquidation,  and  in  many  cases  into  bankruptcy, 

"Nearly  200  of  our  railroad  companies  have  defaulted  in  the  pay- 
ment of  their  interest  on  bonds  to  the  amount  of  $789,367,665,  and 
the  greater  number  of  them  have  been  placed  in  the  hands  of  receiv- 
ers. According  to  official  reports,  out  of  811  railroads  in  the  United 
States  only  196  were  earning  dividends  in  1876. 

"Over  one-half  of  the  furnaces,  fouudi-ies,  machine-shops,  and 
rolling  mills  of  the  United  States  are  idle,  and  nearly  all  of  those 
which^are  in  operation  are  losing  money.  On  the  1st  day  of  Sep- 
tember, 1876,  out  of  719  iron  furnaoes  in  the  United  States,  503  were 
out  of  blast. 

"Our  inland  as  well  as  our  foreign  commerce  has  almost  ceased 
to  have  existence,  and  instead  of  hundreds  of  thousands  of  people 
coming  from  abroad  annually,  the  strange  spectacle  is  witnessed  of 
foreitruers  returning  to  their  native  land  to  better  their  condition. 

"Rents  have  fallen  in  all  our  cities  from  30  to  50  per  cent.,  and 
the  people  of  some  of  our  largest  cities  are  unable  to  pay  their  taxes 
— the  delinquent  lists  in  some  cases  exceeding  the  amount  collected! 

"States— not  even  excepting  some  of  Northern  locality— are  in 
default  in  payment  of  the  interest  on  their  public  debt,  not  from 
choice,  but  from  compulsion,  the  people  being  unable  to  nay  their 
taxes. 

•'Thousands  of  business  men  have  been  keeping  up  their  estab- 
lishments at  a  loss  each  year,  hoping— vainly,  thus  far— that  a  change 
for  the  better  would  occur.  The  misfortunes  have  come,  not  alone 
to  the  reckless,  the  extravagant,  or  the  speculative  The  wise  and 
prudent  business  men  of  the  country,  in  vast  numbers,  have  been 
(and  are  beinsi  daily)  overwhelmed  by  the  groat  national  calamity 
that  broods  over  us.  Men  who  by  a  lifetime  of  toil  and  economy 
had  accumulated,  as  they  supposed,  a  competency  for  tlieir  declin- 
ing years,  suddenly  find  themselves— scarce  knowing  how  or  why— 
utterly  ruined;  their  business  at  a  standstill;  their  income  cut  oflf, 
and  their  property  sold  to  pay  debts  of  not  one-fourth  its  value. 
Hundreds  of  thousands  of  men  willing  and  anxious  to  labor  cannot 
find  emplovment.  Nearly  every  productive  industry  of  the  country 
is  in  a  crippled,  if  not  in  a  bankrupt,  condition.  'Tramps'  fill  the 
land,  and  an  almost  universal  cry  of  distress  is  heard  in  every  part 
of  the  Union.    In  the  eloquent  language  of  Mr.  Peudelton's  recent 


THE  PRESENT  CRISIS.  313 

Columbus  speech :  'Men  are  idle  ;  women  are  suffering  ;  children  are 
hungry  ;  and  all  are  unhappy  ;  our  industries  are  a  I  deranged  ;  busi- 
ness is  sCagiiaTit ;  enterprise  and  energy  sit  icith  f-idrd  hnnds^  and  all 
men  look  with  anxiety  for  that  which  shall  come  to  pass.^  " 

From  a  speech  of  Hon.  Win.  D.  Kelly,  in  Congress, 

November  15tli,  1877  ; 

"Lnnd,  as  Mr.  Shuckers  has  shoAvn  us,  sold  iu  Ln2f>and  for  nomi- 
nal prices  during  the  approach  to  resumption.  I  li.>  d  in  my  hand 
the  rhihideli)hia  Times  of  November  5th,  a  conservative  paper, 
which  dissJOiits  in  the  main  from  my  vicvsrs,  but  wiiich  does  believe 
that  a  government  bond  interconvertible  at  all  times  with  money 
"would  be  a  safer  depositor}'  for  the  people's  earnings  flian  savings- 
banlis  have  shown  themselves  to  he  within  the  last  four  years,  and 
would  therefore  allow  the  government  to  receive  the  people's  eani 
iugs  on  deposit  in  excliange  for  such  bonds.     It  says  : 

*' To-day,  at  four  o'clock,  in  the  new  quartcr-nui.-tcr-house,  Sher- 
iff Wright  w\\  sell  under  the  hammer  the  large.-t  n  mber  of  proper- 
ties of  unfortunate  debtors  ever  exposed  at  one  f-ale  in  this  county. 
There  are  four  hundred  and  thirtj'-uiue  writs  on  the  list,  embracing 
in  all  over  fitteen  hundred  different  properties.  Ab-ut  seventy-five 
of  these  are  sales  to  be  made  on  foreclosed  mortgaiivs  or  building 
associations  for  money  advanced  mostly  c>n  the  small  homes  of  the 
laboring  classes. 

"  I  hive  heard  gentlemen  say  :  '  They  who  hav'-;  rashly  speculated 
ought  to  be  wiped  out,  and  tlie  currency  ought  to  be  made  more  val- 
uable.' Sir,  the  owners  of  these  seventy-live  homi'S  have  not  been 
rash  speculators.  They  characterize  my  native  city  which  I  have 
had  the  lionor  so  long  to  represent  here.  They  are  workincr  people ; 
they  train  their  children  mainly  to  mechanical  pur  nits.  They  had, 
with  their  sons  and  daughters,  learned  liow  muc  i  they  could  earn  a 
month  and  how  much,  after  living  comfortably,  they  could  set  apart 
as  savings.  These  savings  tliey  put  into  stock  in  b'lilding  associa- 
tions. And  I  say  here,  as  I  have  often  said  elsewhere,  that  the  build- 
ing association  is,  in  normal  times,  the  best  saviugs  iu-titutiou  I 
have  ever  known,  and  one  calculated  to  make  the  best  citizens  of 
poor  pi  op!e.  These  working  people  have  gone  on  paying  until  all 
the  family  lost  employment,  or  all  but  one  or  tw  >,  whose  earnings 
were  necessary  to  support  the  household.  Uuab'e  to  pay  their 
monthly  installments,  their  homes,  often  paid  for  \\  ithiu  two  hun- 
dred or  three  hundred  dollars,  sonietiuies  within  one  hundrid,  are 
being  disposed  of  to  the 'wrecker,'  to  quote  fr<»m  the  gentleman 
from  Georgia  who  spoke  yesterday  (Mr.  Felton  ) — the  wrecker 
who  stands  by  and  sees  the  ship  stranded  and  her  crew  .struggling  in 
the  surging  Ava'  ers,  iu  the  hope  that  the  cargo  may  be  picked  up  and 
purc^asrd  by  him  for  a  nominal  price. 

"  Philadelphia  does  not  suffer  alone.  Turn  to  the  c'ty  of  Boston 
and  Slate  of  Massachusetts.  How  are  values  shrinking  there? 
The  assessed  value  of  the  real  estate  of  the  city  of  lioston  shrank 
$54,000,000  in  the  last  year,  and  the  assessed  value  of  the  personal 
property  of  her  citizens  to  a  greater  extent.  The  assessed  value  of 
personal  and  leal  estate  in  Massachusetts  shrank  last  year  more 
thau  $101,000,000. 


314     MOISTETARY    HISTORY    OF    THE    UNITED    STATES  : 


*'  But.  gentlemen,  the  worst  has  not  yet  come  if  this  act  is  to  be 
maintained.  And  I  tell  you — and  you  may  book  it  to  jeer  and  scoff 
at  nie  fifteen  mouths  lieuce  if  it  prove  not  to  be  a  true  prediction — 
the  sultering  we  have  endured  during  the  three  years  tills  law  has 
been  in  existence  is  like  the  chill  which  embellishes  while  it  blasts 
with  feathered  frost  the  leaves  and  flowers  of  the  tropical  plants 
that  surround  the  homes  of  our  extreme  Southern  States,  compared 
with  the  arctic  cold  that  builds  up  the  mountainous  iceberg  which 
chills  the  summer  atmosphere  of  our  coast  as  it  passes  ucux  wux 
shores  " 

From  the  Banker  s  Magazine,  Juife,  1877  : 

"The  Financial  Situation  — Among  the  most  prominent  topics 
of  discussion  in  tinaiicial  circles  is  the  revival  that  has  been  so  gen- 
erally expected  from  that  widespread  stagnation  by  which  nearly  all 
the  commercial  nations  of  Europe  have  suffered  equally  witti  our- 
selves. When  the  panic  <  f  1873  occurred,  few  persons  supposed  that 
the  effects  of  that  disaster  would  extend  sofar  or  would  last  so  long. 
The  favorite  theory  was  that,  like  all  other  recent  monetary  spasms, 
the  Jay  Cooke,panic  would  soon  pass  away,  leaving  but  little  trace 
of  its  visitation.  Many  months  elansed  before  the  true  nature  of 
the  economic  crisis  which  was  then  beginning  was  at  all  appreciated 
even  by  the  shrewdest  and  most  far-seeing  of  our  financial  obser- 
vers. It  is  so  natural  to  the  human  intellect  to  seek  out  arguments 
to  prove  and  sustain  its  foregone  conclusions,  and  the  American 
mind  is  so  habituated,  in  finance  as  elsewhere,  to  look  upon  the 
bright  and  hopeful  side  of  the  early  future,  that  there  is  no  wonder 
if  a  general  disposition  was  manifested  to  regard  the  storm  which 
was  passing  over  the  country  as  a  mere  temporary  disturbance  of 
the  financial  firmament,  destined  to  close  before  long  and  to  usher 
in  a  bright  day  of  industrial  prosperity  and  continued  growth.  It 
was  not  then  seen  how  deep  were  the  injuries  which  had  been  sus- 
tained by  our  commercial  and  industrial  organism,  in  consequence 
of  the  protracted  period  of  extravagant  inflation  and  expanded  credit, 
in  which  vast  amounts  ot  floating  capital  had  been,  j'ear  after  year, 
converted  into  fixed  forms  of  investment  in  railroads  and  a  multi- 
tude of  other  productive  enterprises;  until,  like  Nebuchadnezzar's 
image,  the  great  structure  which  had  been  reared  fell  in  ruins  with- 
out expectation,  ahnost  without  warning,  and  fi'om  causes  which 
were  all  but  unknown. 

"The  panic  of  1873  differed  in  several  essential  points  from  the 
financial  revulsions  which  were  before  on  record.  In  1837,  1848, 
1857,  18G1,  and  18G6,  the  trouble  was  rather  flue  to  a  disturbance  of 
credit  or  of  currency,  which  are  two  of  the  three  great  forces  of  the 
financial  world.  At  present  the  evil  lies  in  another  quarter  It  is 
capital  now  which  originates  the  financial  perturbation.  Hence,  it 
has  been  well  said  that  'capital   is  on  strike.'        *  *         * 

"The  predictions  of  such  conservative  men  were  made  light  of, 
and  the  growth  of  the  thiancial  fabric  wenton  with  dangerous  speed, 
until  the  panic  of  1873  brought  it  down  in  disaster. 

''From  that  time  cupiial  has  been  obstinately  avoiding  and  refus- 
ing its  old  channels  of  absorption  and  investment,  as  is  proved  by 
the  low  rates  at  which  it  is  now  lending  on  call.     The  capital  which 


THE  riiESENT  CRISIS.  315 

formerly  wonld  have  soniiht  permanent  investment  is  now  timidly 
hoardod,  and  the  pletlioric  re-^erves  of  loanable  funds  in  all  the  great 
monetary  centirs  are  full  to  overflowing.  Capital  is  on  strike,  not 
because  it  shrinks  from  employment  aitogether,  but  because  it  re- 
fuses its  old  employments  in  the  clianuils  of  permanent  investment. 

"Nor  is  tins  ilie  only  feature  of  the  present  crisis.  Another  of 
equal  imiiortaiue  is  the  check  which  has  been  given  to  enterprise 
and  industrial  activity  Even  were  capital  less  timid,  good  borrow- 
ers are  scarce.  The  men  who  are  capable  of  organizinir  labor  and 
of  developing  the  productive  energies  of  the  country  with  safety  and 
sucess,  have  been  discourazed  and  repelled  by  the  insecurity  and 
incertiirde  which  covered  the  financial  world  with  srloom. 

"The  depression  which  has  done  so  much  to  injure  and  impede 
the  movements  of  capiial,  has  of  course  spread  much  distress 
amonx  the  laboring  population,  and  has  thrown  great  multitudes 
out  of  work.  In  lu'oof  of  this  tlie  following  table  has  been  prepared 
of  the  in-door  panperism.iu  England  a^  present  as  compared  with  a 
year  ago.  The  table  is  as  follows,  and  shows  an  increase  during 
the  last  year  of  nearly  live  per  cent.,  and  the  out-door  pauperism  is 
reported  to  show  even  a  larger  increase  : 

IN-DOOR   PAUPERS,  FEBRUARY   28,  1876   AXD    1877. 
DIVISIONS.  1877.  1870.  INCREASE. 

The  Metropolis 3<).18.5  37,321  1,865 

South-Ea'<tern 17,707  17  r)7.>  132 

South  Midland 9,851  9,547  304 

Ea.stern 8,722  8,592  130 

South-Western 11,332  1^,792  540 

West  Midland 16  339  15,033  1,306 

North  Midland 6,581  6,372  209 

Noith-VVestern 21,292  20,096  1,196 

York 10,286  9,556  680 

Northern 5  946  5,734  212 

Welsh 5  597  5,002  595 

152,786  145  G20  7,166 

"In  view  of  these  facts  it  is  easy  to  see  that  the  recuperation 
which  has  been  so  often  predicted  and  so  ardently  waited  for  may 
be  still  deferred,  and  may  be  slow  and  ineirnlar  in  developing  itself. 
Our  vast  area  of  asriculrural  production  gives  us  exceptional  ad- 
vantaires,  especially  in  the  event  of  a  p'  otracted  war  in  the  Orient. 
We  have  also  many  other  advantages  which  seem  to  give  ns  a  better 
prospect  of  early  revival  in  industrial  and  financial  activity  than  is 
offered  to  most  of  the  naticms  of  p:urope." 

Capital  on  a  strike  !  It  is  true.  And  the  strike  of 
capital  drove  200,000  hungry  laborers  to  strike  dur- 
ing last  summer,  who  made  capital  to  quake  in  its 
slippers. 

But  why  is  capital  on  a  strike?  Not  voluntarily. 
No  !    It  is  because  the  legislation  of  governments  has 


316        MONETARY  HISTORY  OF  THE  UNITED  STATES  : 

SO  reduced  the  world's  stock  of  money  in  the  face  of 
untold  millions  of  debt  as  to  make  it  shrink  from  in- 
vestment or  accommodation  from  sheer  fear  of  des- 
truction. 

The  check  which  has  been  given  to  enterprise  and  in- 
dustrial activity  has  rendered  it  impossible  for  the  real 
benefactors  of  mankind,  the  enterprising  workers  of 
society,  to  draw  profits  from  labor  or  trade. 

The  constant  decline  of  the  volume  of  money  has 
caused  a  constant  shrinkage  of  values  in  this  country 
since  1866.  This  shrinkao;e  of  values  has  entailed  con- 
stant  losses  in  all  branches  of  business.  These  losses 
have  astoundingly  increased  bankruptcies,  raising  them 
from  little  over  500  in  1865  to  nearly  10,000  in  1877— 
almost  2,000  per  cent,  increase.  These  bankruptcies 
have  caused  money  lenders  to  lose  millions,  hence  they 
will  no  longer  lend,  and  capital  Avill  not  seek  employ_ 
ment  in  any  business  enterprise  because  the  contin- 
uing shrinkago  of  values,  resulting  from  a  continually 
lessening  voluiie  of  money,  makes  profitable  investment 
impossible,  c  iployment  of  capital  certain  loss,  and 
causes  hoarding  of  money  to  enrich  the  capitalist  on 
account  of  the  increasing  purchasing  power  of  money. 

Hence,  much  of  the  currency  has  found  its  way  to 
the  great  financial  centres  and,  because  gilt-edged  bor- 
rowers are  scarce,  it  is  hoarded  and  those  whose  mental 
vision  is  too  limited  to  look  beyond  the  gilded  circles 
of  banks  and  money  changers  exclaim,  "A  plethora  of 
money  !"  when  there  is  scarcely  enough  to  circulate. 

lion.  David  A.  Wells,  a  very  ardent  advocate  of 
resumption,  has  been  writing  a  series  of  articles  this 
year  (1877)  for  the  North  American  Revieio,  under 
the  significant  caption,  "How  shall  the  Nation  Regain 


TIIE  PRESENT  CRISIS.  317 

Prosperity?"  This  implies  all  that  has  been  said  or 
that  could  perhaps  be  said.  It  implies  that  this  nation 
is  now  in  adversity. 

Extract  from  the  report  made  March  2d,  1877,  of 
the  Monetary  Commission  appointed  by  a  joint  resolu- 
tion of  both  Houses  of  Congress  August  loth,  1876: 

"  Effects  of  a  Decreasing  Volume  of  Money  — While  the 
volume  of  money  is  decreasing,  even  although  very  slowly,  the  val- 
ue of  each  unit  of  money  is  increasing  in  corresponding  ratio,  and 
property  is  falling  in  price.  Those  who  have  contracttd  to  pay 
money  find  that  it  is  constantly  becoming  more  difficu  t  to 
meet  their  engagements.  The  margin  of  securities  melt  rapidly 
away,  and  the  confiscation  by  the  creditor  of  the  property  on  wliicli 
they  are  based,  becomes  only  a  question  of  time.  All  productive 
enterprises  are  discouraged  and  stagnated,  because  the  cost  of  pro- 
ducing commodities  to-day  will  not  be  covered  by  the  price  obtain- 
able for  them  to  morrow.  Exchanges  become  sluggish,  because 
those  who  have  money  will  not  part  with  it,  for  either  property  or 
services,  beyond  tlie  recjuirements  of  actual  current  necessities,  for 
the  obvious  reason  that  money  alone  is  increasing  in  value,  while 
everything  else  is  decreasing  in  price.  This  results  in  the  widi- 
drawal  of  money  from  the  channels  of  circulation,  and  its  deposit 
in  great  hoards,  where  it  can  exert  no  influence  on  prices.  Tiiis 
hoarding  of  money  from  the  nature  of  things  must  continue  and  in- 
crease, not  only  until  the  shrinkage  of  its  volume  has  actually 
ceased,  but  until  capitalists  are  entii-ely  statisfied  that  money  l.\  ing 
idle  on  special  deposit  will  no  longer  afford  them  revenue,  and  that 
the  lowest  level  of  prices  has  been  reached.  It  is  this  hoarding  of 
money,  when  its  volume  shrinks,  which  causes  a  fall  in  prices  great- 
er than  would  be  caused  by  the  direct  effect  of  a  decrease  in  the  stock 
of  money.  Money,  in  shrinking  volume,  becomes  the  paramount 
object  of  commerce,  instead  of  its  benelicieut  instrument  Instead 
of  mobilizing  industry,  it  poisons  and  dries  up  its  life  currents.  It 
is  the  fruitful  source  of  political  and  social  disturbances.  It 
foments  strife  between  labor  and  other  forms  of  capital,  while 
itself  hidden  away  in  security  gorges  on  both.  It  rewards  close- 
llsied  lenders,  and  filches  and  bankrupts  enterprising  borrowers. 
It  circulates  freely  in  the  stock  exchange,  but  avoids  the  lab  )r  ex- 
change. It  has  in  all  ages  been  the  worst  enemy  with  which  society 
has  had  to  contend 

•'The  great  and  still  continuing  fall  in  prices  in  the  United  States 
has  proven  most  disastrous  to  nearly  every  industrial  enterprise. 
The  bittex'  experience  of  the  last  few  years  has  been  an  expensive, 
but  most  thorough  teaciier.  It  has  taught  capitalists  neither  to  in- 
vest in  nor  loan  money  on  such  enterprises,  and  just  as  thorouirhly 
has  it  taught  business  men  not  to  borrow  for  the  purpose  of  inaugu- 
rating or  prosecuting  them.  Of  the  few  business  enterpri>es  now 
being  successfully  prosecuted,  the  larger  part  are  based  on  a  monop- 
oly secured  either  by  patents  or  exceptional  conditions.  'Ihe  busi- 
ness man  has  discovered  that  the  less  active  and  enterprising  he  is,. 


318     MONETARY   HISTORY   OF   THE   UNITED   STATES  : 

the  better  he  is  off.     The  manufacturer  avoids  loss  by   damping 
down  furuace-flres  aud  slowing  down  machinery. 

"The  minins  companies  would  find  profit  in  inactivity,  and  would 
propably  suspend  operations,  were  it  not  for  the  {ireat  loss  they 
would  sustain  in  doing  so.  Mines  can  be  properly  opened  only 
through  a  great  outlay  of  capital,  which  would  be  practically  lost  if 
they  were  closed  down  for  any  considerable  period  of  time.  The  filling 
up  with  water,  the  caving  in  of  galleries,  the  crashing  in  of  sliafts, 
the  rusting  of  machinery,  and  the  general  disarrangement  of  their 
interior  workings  would  require  for  their  repair  a  not  much  1  ss  ex- 
penditure than  was  necessary  for  their  original  openhig.  Hoping 
for  better  times,  they  therefore  struggle  on  against  an  adverse  cur- 
rent without  profit,  aud  generally  only  without  loss  by  reducing 
their  miscellaneous  expenditures  to  the  lowest  possible  point,  and 
wages  to  a  starvation  level.  The  miners  ascend  from  the  dark  and 
gloomy  depths  of  the  mine  witii  their  scanty  pittance  called  wag.-s, 
to  find  in  a  famishing  household  a  gloom  that  is  more  profound. 
They  await  with  heroic  fortitude  and  a  sometimes  impatient  hope 
the  advent  of  another  Sir  Humphrey  Davy,  with  a  lamp  capable  of 
shedding  light  on  the  cause  of  existing  evils,  and  of  protecting 
them  and  all  others  who  depend  on  their  labor  for  their  daily  bread 
against  a  lingering  misery  more  to  be  dreaded  than  the  deathly  dan- 
ger that  lurks  in  the  teacherous  fire-damp. 

•'The  stockholders  of  railroads  have  suffered  avast  shrinkage  ia 
the  value  of  their  property  and  in  the  volume  of  their  traffic  and  in 
rates  of  transportation  while  their  debts  have  remained  uommally 
the  same,  but  really  increasing.  In  order  to  make  their  decrease 
receipts  meet  the  interest  on  their  bonds,  they  are  forced  to  reduce 
their  operating  expenses  to  the  lowest  possible  point.  Their  strug- 
gles seem  to  be  in  vain,  and  unless  that  system  can  be  changed, 
which  is  making  each  dollar  which  they  owe  more  valuable,  and  at 
the  same  time  causing  a  shrinkage  in  their  business,  and  which  is 
chain iu2  labor  and  all  other  forms  of  capital  to  the  chariot  wheels 
of  money-capital,  they  will,  one  after  another,  be  swallowed  by  the 
bondholders.  In  the  end  the  stockholders  will  be  entirely  out  of 
the  accouut,  and  the  contest  will  be  between  different  classes  of 
bondholders,  if  that  can  be  called  a  contest  where  victory  is  assured 
in  advance  to  the  liens  which  have  priority. 

"Farmers,  whose  land-  are  not  mortgaged,  and  their  employees, 
who  at  least  are  insured  against  absolute  want,  best  escape  the  evils 
of  the  times,  but  the  prices  of  agricultural  products  must  finally 
decline  with  the  reduction  in  the  number  and  means  of  the  consum- 
ers. The  tendency  of  falling  prices  is  to  break  down  the  vast  diversi- 
fied interests  of  the  country,  and  to  force  a  constantly-increasing 
proportion  of  the  population  into  the  one  single  primitive  industry 
of  cultivating  the  soil.  The  United  States,  instead  of  continuing 
a  highly  commercial  and  manufacturing  nation,  will,  until  falling 
prices  are  checked,  become  more  and  more  exclusively  agricultural 
and  pastoral. 

"Securities  have  already  become  so  impaired  through  falling 
prices,  that  loanable  capital  has  fled  affrighted  from  the  newer  and 
more  sparsely  settled  sections  of  the  country,  and  accumulated  ia 
large  amounts  in  the  great  financial  centers  where  securities  are 
juore  ample.     The  personal  aud  property  securities  of  inviduals 


THE  PRESENT  CRISIS.  319 

Tiave  generally  ceased  to  be  available,  except  at  the  highest  rates  of  in- 
terest, or  at.  ruiuuusly  low  valuation-.  Money  cau  be  borrowed 
readily,  only  upon  such  securities  as  bonds  which  arc  based  on  the 
unlimited  tax-levying  power  of  the  government  or  upon  the  bonds 
and  stocks  of  flrst-ciass  trunk-lines  of  railroad  corporations,  whose 
freight  and  fare  rates  are  practically  a  tax  upon  the  entire  popula- 
tion and  resources  or  the  regions  which  they  traverse  and  supply. 
The  competition  among  capitalists  to  loan  money  ou  these  more 
ample  securities,  has  become  very  keen,  and  such  securities  com- 
mand money  at  unprecedentedly  low  rates.  These  low  and  lowering 
rates  of  interest,  instead  of  denoting  tlnancial  strength  and  indus- 
trial prosperity,  are  a  gauge  of  iucreasing  prostration.  Large  ac- 
cumulations of  money  in  financial  centers,  instead  of  being  caused 
by  the  overflow  of  a  healthful  circulation,  or  eveu  a  proof  of  a  suffi- 
cient circulation,  are  unmistakable  evidence  of  a  congested  condi- 
tion, caused  by  a  decreasing  and  insufficient  circulation.  The  readi- 
ness with  which  government  bonds  bearing  a  very  low  rate  of  in- 
terest are  taken,  instead  of  showing  that  the  credit  of  the  government 
has  improved,  is  melauclioly  evidence  of  the  prostrated  condition 
to  which  industry  and  trade  have  been  reduced 

"■Effects  of  a  shrinking  vilume  of  money  on  productive  industry — 
The  worst  effect,  however,  economically  considered,  of  falling 
prices,  is  not  upou  existing  property  nor  upon  debtors,  evil  as  it  is, 
but  upon  laborers  whom  it  deprives  of  employment  and  consigns  to 
poverty,  and  upou  society,  which  it  deprives  of  that  vast  sum  of 
wealth  which  resides  potentially  in  the  vigorous  arms  of  the  idle 
workman.  A  shrinking  volume  of  money  transfers  existing  pro- 
perty unjustly,  and  causes  a  concentration  and  diminution  of  wealth. 
It  also  impairs  the  value  of  existing  property  by  eliminating  from  it 
that  important  elemenf.  of  value  eonferre<l  ujjon  it  by  the  skill,  en- 
ergy and  care  of  the  debtors  from  whom  it  is  wrested.  But  it  does 
not  destroy  any  existing  property,  while  it  does  absolutely  annihi- 
late all  the  values  producible  by  the  labor  which  it  condemns  to  idle- 
ness. The  estimate  is  not  an  extravagant  one  that  there  are  now 
in  the  United  States  three  million  persons  willing  to  work,  but  who 
are  idle  because  they  cannot  obtain  employment. 

"This  vast  poverty  stricken  army  is  increasing  and  will  continue 
to  increase  as  long  as  faldiig  prices  sha.l  continue  to  separate  money 
capital,  the  fund  out  of  which  wages  are  paid,  from  labor,  and  to 
discourage  the  investments  iu  other  forms  of  property. 

«'In  Older  that  any  country  may  reach  the  maximum  of  material 
prosperity,  certain  conditions  are  indispensable.  All  its  labor,  as- 
sisted by  the  most  appri-ved  machinery  and  appliances,  must  be  em- 
ployed, and  the  fruits  of  industry  must  be  justly  distributed.  These 
conditions  are  only  possible  wheu  capital  is  absolutely  protected 
against  violence  and  free  from  illegitmate  legislative  interference, 
and  when  the  laborer  is  protected  iu  his  natural  right  to  dispose  of 
his  labor  iu  such  manner  as  he  may  prefer.  They  are  utterly  im- 
possible when  the  money  .stock  is  shrinking  and  the  money  value  of 
property  and  services  is  declining.  Howsoevi-r  great  the  natural 
resources  of  a  cimntry  may  be,  however  genial  its  climate,  fertile  its 
soil,  ingenious,  industrious,  and  enterprising  its  inhabitaffts,  or  free 
its  institutions,  if  the  volume  of  money  is  shriukiu'.;  and  prices  are 
ialling,  its  merchants  will  be  overwhelmed  with  bankruptcy,  its  in- 


320      MONETARY  HISTORY  OF  THE  UNITED  STATES  : 

dustries  will  be  paralizod,  and  destitution  and  distress  will  prevail. 
It  is  in  the  shadow  of  a  shrinking  volume  of  money  that  disor- 
ders social  and  political,  gender  and  fester,  that  communism  organ- 
izes, that  riots  threaten  and  destroy,  that  labor  starves,  that  capi- 
talists conspire,  and  workmen  combine,  and  that  the  revenue  of 
governments  are  dissipated  in  the  employment  of  laborers,  or  in 
the  maiutainance  of  increased  standing  armies  to  over-awe  them. 
The  peaceful  war  which,  under  a  just  money  system,  is  continually 
waged  between  money-capital  and  labor,  and  which  tends  only  to 
secure  the  rights  of  each  and  is  e.-sential  to  the  progress  of  society, 
is  changed  under  a  shrinking  volume  of  money  to  an  unrelenting 
war,  threatening  the  destruction  of  both. 

"The  equitable  adjustment  of  the  correlative  demands  of  capital 
and  labor  cannot  be  made  through  violence,  and  is  uterly  impossi- 
ble through  any  legal  or  otlier  contrivance,  under  any  system  that 
permits  contraction  or  undue  expansion  of  that  great  instrument 
which  measures  alike  the  property  of  the  capitalist  and  the  labor  of 
the  workman. 

"The  vei'y  same  reason  which  makes  capitalists  refuse  to  exchange 
money,  whose  command  over  property  is  inci'easing,  for  property, 
whose  command  over  money  is  decreasing,  also  makes  them  refuse 
to  exchange  it  for  labor  for  the  production  of  property.  In  a  com- 
mercial sense,  industrial  enterprises  are  never  undertaken  nor  car- 
ried on  except  with  the  hope  and  expectation  of  gain  This  expec- 
tation, unless  under  excefitional  conditions,  falling  markets  destroy. 
While  capitalists,  for  th^-se  reasons,  cannot  atlbrd  to  invest  money 
in  productive  enterprises,  still  less  can  anybody  afford  to  borrow 
monev  for  such  investments  at  any  rate  of  interest,  however  low, 
and  but  little  money  is  bt'ing  now  borrowed,  except  for  purely  spec- 
ulative ventures,  or  to  supply  j)ersonal  and  family  wants,  or  to  re- 
new old  obligations.  Money  withdrawn  from  circulation  and  hoarded 
in  consequence  of  falling  prices,  although  neither  paying  wages,  nor 
serving  to  exchange  the  fruits  of  industry,  nor  pi-norniing  any  of 
the  true  functions  of  money,  is  nevertheh'ss  not  unproductive.  It 
may  not  be  earning  interest,  but  it  is  enriching  its  owner  through 
an  increase  of  its  own  value,  and  that,  too,  without  risk  and  at  the 
expense  of  society.  The  peculiar  effect  of  a  contraction  in  the  vol- 
ume of  money  is  to  give  profit  to  the  owners  of  unemployed  money, 
through  the  appreciation  of  its  purchasing  power,  by  the  mere  lapse 
of  time. 

"It  is  falling  prices  that  robs  labor  of  employment  and  precipi- 
tates a  conflict  between  it  and  money  capital,  and  it  is  the  appreciat- 
ing effect  which  a  shrinkage  in  the  volume  of  money  has  on  the 
value  of  money  that  renders  the  content  an  unequal  one,  and  gives 
to  money  capital  the  decisive  advantage  over  labor  and  over  other 
forms  of  capital  invested  in  industrial  enterprises.  Idle  machinery 
and  industrial  appliances  of  all  kinds,  instead  of  being  productive  of 
profit,  are  a  source  of  loss.  They  constantly  deteiiorate  through 
rust  and  waste.  They  cannot  escape  the  a-<sessor  and  tax-gatherer, 
as  the  bulk  of  money  does,  and  must  (>ay  extra  insurance  when  idle. 
Labor,  unlike  money,  cannot  be  hoarded.  The  d.iy  s  labor  unper- 
formed is  so  much  capital  lost  forever  to  the  laborer  and  to  society. 
It  beimr  tiis  only  capital,  his  only  means  of  existence,  the  laborer 
cannot  wait  on  better  times  for  better  wages.      Absolute  necessity 


THE   PRESENT    CRISIS.  321 

forces  him  to  dispose  of  it  on  any  terms  which  the  owners  of  money 
may  dictate.  These  are  the  conditions  which  surround  tlie  laborer 
througliout  the  commercial  world  to-day. 

'♦These  laborers  must  make  their  wants  conform  to  their  dimin- 
ished earnings.  They  must  content  themselves  with  such  things  as 
are  absolutely  essential  to  their  existence.  Consumption  is  there- 
fore constantly  shrnking  toward  such  limits  as  urgent  necessities 
require.  Productiou,  which  must  be  confined  to  the  limits  indicated 
by  consumption,  is  constantly  tending  toward  its  minimum,  whereas 
its  appliances,  built  up  under  more  favorable  conditions,  are  suffi- 
cient to  supply  the  maximum  of  consumption.  Thus  idle  labor,  idle 
money,  idle  machinery,  and  idle  capital  stand  facing  each  other,  and 
the  stagnation  spreads  wider  and  wider.  The  future  affords  no 
hope  or  prospect  of  improvement,  except  through  a  change  in  finan- 
cial policies  Prices  have  been  persistently  falling  throughout  the 
world  since  1873,  and  as  fast  and  as  far  in  specie-paying  countries 
as  elsewhere.  If  the  policy  of  chaining  the  industry  and  commerce 
of  the  world  to  a  single  metal  be  persisted  in  by  the  United  States, 
Germany,  and  the  other  European  countries  acting  in  concert  with 
them,  money  must  still  rise  in  value,  and  prices  must  continue  to 
fall.  The  depression  in  productive  industry  will  become  more 
deadly,  and  the  number  of  idle  laborers  will  indefinitely  multiply. 

'The  loss  which  this  country  sustains  by  reason  of  the  enforced 
idleness  of  three  million  persons,  who  although  idle,  must  still  in 
some  scanty  way  be  supplied  with  food,  clothing,  and  shelter,  is  in 
the  aggregate  very  great.  If  it  be  estimated  at  one  dollar  per  day 
for  each  laborer,  it  would  amount  in  two  years  to  a  sum  sufficient 
to  discharge  the  national  debt.  It  would  pay  the  interest,  at  5  per 
cent  per  annum,  on  eighteen  thousand  millions  of  dollars.  It  would 
be  a  sum  more  than  sufficient  to  supply  anew  each  year  the  circula- 
ting medium  of  the  country.  It  would  amount,  in  four  years,  to  a 
greater  sum  than  the  world's  entire  gold  product  has  amounted  to 
in  the  last  fifty  prolific  years.  It  would  aggregate  in  ten  years  a 
value  far  greater  than  the  value  of  the  world's  entire  product  of 
both  gold  and  silver  for  the  last  hundred  years.  It  would  amount 
in  four  years  to  a  sum  more  than  sufficient  to  duplicate  and  stock 
every  mile  of  railroad  now  in  the  United  States.  Contrasted  with 
the  startling  sum  thus  annually  lost  through  the  shrinkage  of  mouey 
and  falling  prices,  the  amount  which  could  by  any  possibility  be 
lost  in  a  generation  through  fluctations  in  the  relative  values  of 
gold,  silver,  and  paper  would  weigh  as  mere  dust  in  the  balance.  If 
to  this  loss  be  added  that  caused  by  non-employment  of  productive 
machinery  and  appliances,  the  aggregate  becomes  appalling.  The 
average  stocks  of  nearly  all  commodities  are  at  no  time  sufficient 
for  more  than  a  few  months'  consumption.  Without  constant  re- 
production mankind  would  soon  be  stripped  of  all  their  movable 
posses.^ions.  No  more  fatal  blow,  therefore,  could  be  directed 
against  the  economical  machinery  of  civilized  life  than  one  against 
labor,  and  that  blow  can  be  most  eflectively  delivered  through  a  pol- 
icy which  strikes  down  prices." 

Archbishop  Purcell,  on  the  occasion  of  the  dedication 
of  the  Davidson  Fountain,  in  Cincinnati,  in  October, 


322      MONETARY  HISTORY  OF  THE  UNITED  STATES  : 

1871,  said:  "  Who  is  there  at  the  present  hour  who 
sees  not  in  the  nearing  future  the  first  signs  of  a  con- 
flict ;"I  mean  the  irrepressible  conflict  of  rich  and  poor 
— of  capital  and  labor?"  How  true!  How  terribly 
it  has  been  verified  in  1877  ! 

Extract  from  a  letter  of  Hon.  S.  F.  Gary,  in  the 
Irish  World,  August  25th,  1877  : 

"Dear  money  and  cheap  labor  antagonize  well-paid  labor  and 
cheap  money.  The  former  is  tlie  object  of  the  monied  class;  the 
latter  is  the'absolute  need  of  the  producing  class.  To  secure  the 
former  the  contraction  and  resumption  policy  of  the  Government 
was  inaugurated ;  to  obtain  the  latter  there  should  be  earnest  and 
united  action  by  the  masses.  The  contraction  of  the  circulating 
medium  reduces  the  commercial  value  of  labor  and  of  all  property, 
real  and  personal,  but  it  appreciates  in  like  ratio  the  purchasing 
power  of  bonds  and  money,  and  increases  the  burdens  of  debts  and 
taxes. 

"For  instance,  a  mechanic  in  1865  purchased  himself  a  home,  pay- 
ing one  thousand  didlars  down  and  giving  his  note  and  a  mortgage 
for  one  thousand  moie.  He  was  then  getting  four  dollars  a  day  for 
his  labor,  and  his  purchase  was  then  a  fair  one.  The  note  and  mort- 
gage become  due.  In  the  meantime,  by  the  contraction  of  the  circu- 
lation, he  is  able  only  to  realize  two  do  lars  per  day,  and  his  property 
has  shrank  in  like  proportion,  being  now  dear  at  one  thousand  dol- 
lars. The  bond-liolder  and  money-lender  can  now  iiire  two  men  and 
buy  two  such  homes  as  his,  with  the  same  amount  of  money,  because 
their  means  have  been  dcmbled  in  their  purchasing  power,  while  his 
have  diminished  one-half. 

"If  debts  and  taxes,  and  the  cost  of  living  could  be  scaled  down 
in  proportion  to  men  s  diminislied  resources  to  meet  them,  it  would 
not  work  so  much  injustice  to  labor  and  business  capital. 

"Here  is  the  ^needless  and  unholy  irrepressible  conflict.^  It  has 
been  inaugurated  by  the  greedy  and  rapacious  money  power.  If 
the  starving  millions  of  workingmt-n,  the  manufacturers,  the  mer- 
chants, the  owners  of  railroad  stocks,  and  all  others  who  have  their 
investments  in  productive  industry,  do  not  unite  and  resist  the  en- 
croachments, the  legalized  robberies,  they  deserve  to  be  slaves!  " 

From  a  speech  of  Hon.  A.  H.  Buckner,  in  Congress, 

Nov.  Kith,  1877  : 

"I  have  never  entertained  a  doubt  of  the  impolicy  of  the  attempt 
to  reach  resumption  by  contraction.  I  am  not  surprised  at  the  in- 
crease of  bankruptcy,  "the  shrinkage  of  values,  the  depression  in 
business,  the  paralysis  of  traile  and  commerce  the  despondency  and 
dissatisfaction  of  the  laboring  population,  the  discontent  of  the  ag- 
ricultural classes,  and  the  growth  of  critne  and  civil  commotion,  ap- 
proximating to  the  very  verge  of  social  anarchy.     It  required  no  gift 


THE    TRESENT    CRISIS.  323 

of  prophecy  to  forecast  the  condition  of  the  country,  as  we  neared 
the  lime  fixed  for  convening;  the  vast  nioimtaius  of  debt  of  America 
into  specie  obli;4ations.  No  spicial  ac<iuainlance  wiih  llie  dojzmas 
of  the  so-called  science  of  political  ecuuomy  was  needed  to  fore- 
shadow the  commercial,  industrial,  and  social  mischief  which  must 
necessarily  ensue  upon  the  attempt  to  brinn;  down  tlie  prices  of  all 
commodities  rejjnlated  under  a  r^  duudaut  circulation,  to  the  level  of 
an  lusutHcient  and  contracted  one. 

"The  slightest  knowledge  of  English  history,  the  experience  of 
our  own  country  within  the  knowledge  of  many  now  living,  not  to 
say  the  dictates  of  common  sense  and  the  lacts  of  every-day  life, 
should  have  averted  the  ruin  of  the  great  lal)or  interests  of  this 
country,  which  has  strewed  the  path  of  contraction  and  an  insuffi- 
cient circulation.  For  nearly  ten  long  and  dreary  years  the  people 
have  beeu  uttering  their  protest  auaiust  the  madness  that  ruled  the 
hour  against  the  folly  of  attempting  to  resume  by  crippling  every 
industrial  pursuit,  against  the  criminality  of  conforming  the  tiiian- 
cial  policy  of  this  magnificent  heritage  of  Providence  to  the  demands 
of  Wall  street  and  the  money  drones  of  the  creditor  section  of  the 
Union.  Warnings,  expostulations,  entreaties,  in  season  and  out  of 
season  have  come  up  from  the  toiling,  despairing  millions  against 
a  financial  policy  that  threatens  to  make  shipwreck  of  every  interest 
on  which  the  Government  depends  for  its  support  and  on  which  so- 
ciety depends  for  its  existence  and  prosperity.  And  now  we  are 
confronted  with  the  solution  of  the  question  whether  we  shall  per- 
sist in  this  suicidal  and  destructive  policy  or  whether  we  shall  halt 
in  this  work  of  bankruptcy  and  disaster  and  obliterate  the  crowning 
triumph  of  a  whole  decade  of  financial  wrong-doing :  the  resumption 
act  of  Januarj-,  1875." 

Mr.  Hamilton,  of  Maryland,  a  staunch  resumption- 

ist,  in  a  speech  in  Congress,  Dec.  22d,  1874,  said : 

"We  must  go  back  to  our  normal  condition  before  we  can  build 
up  ourselves  again.  And  we  are  getting  there  day  by  day.  More 
and  more  we  are  enduring,  more  and  more  Me  are  suffering,  and 
now  one  step  more  and  all  may  be  righted  for  a  progi'ess  that  our 
past  bitter  experience  may  secure  for  untold  time." 

Resumption  was  the  "step"  referred  to.  The  step 
has  been  taken  ;  the  act  has  been  passed  nearly  three 
years,  and  yet  no  relief  has  come  ;  it  has  been  a  step  of 
constantly  increasing  suffering  and  distress. 

Following  is  a  list  of  the  number  and  afftrresrate 
amount  of  bankruptcies  from  1857  to  1877  inclusive, 
taken  from  Messrs.  Dunn,  Barlow  &  Co.'s  report: 


324     MONETARY   HISTORY    OF   THE    UNITED    STATES: 


Average 

Tear 

Number 

Amount 

indebtednew 

1857 

4,932 

$291,750,000 

§59,154 

1858 

4,225 

95,749,000 

22,662 

1859 

3,913 

64,394,000 

16,430 

1860 

3,673 

79,807,000 

21,710 

1861  ■ 

6,993 

207,210  O-IO 

29,631 

1862 

1,652 

23,049,300 

13,452 

1863 

485 

6,864,700 

14,154 

1864 

520 

8,579,000 

16,498 

1865 

530 

17,625  000 

33,255 

1866 

632 

47.333  000 

74,894 

1867 

2,386 

86,218,000 

36,134 

1868 

2,608 

63,774,000 

24,452 

1869 

2,799 

75  054,000 

26.814 

1870 

8,551 

88.242,000 

24,849 

1871 

2,915 

85,251,000 

29,245 

1872 

4,069 

121,056,000 

29,750 

1873 

5,183 

228.499  000 

44,085 

1874 

5,830 

155,239,000 

26,627 

1875 

7,740 

201,060,353 

25,978 

1876 

9,092 

191,117,786 

21,020 

1877 

8,872 

190,669,936 

21,491 

Nearly  twenty  times  the  numljer,  and  over  ten  times 
the  liabilities,  in  1877,  that  there  were  in  1865. 

There  were  89  failures  in  New  York  in  the  mouth  of 
December,  1877,  not  including  11  assignments.  The 
aggregate  assets  were  $3,118,000,  and  the  liabilities  $7,- 
704,000.  This  record  exceeds  by  25  per  cent,  that  of 
any  previous  month  of  the  year  1877. 

Commenting  upon  the  increase  of  bankruptcies  of 
1876  and  1877,  the  N.  Y.  Mercantile  Journal  said : 

"The  results  of  the  first  half  of  the  present  year  are  by  no  means 
entirely  satisfactory .  Neither  as  to  extent  or  profltableue.'-s  are  there 
many  signs  of  improvement:  while  in  the  recovery  or  stability  of 
values  the  indications  are  uncertain,  and  not  ^infrequently  the  tenden- 
cy is  still  decidedly  doionward.  All  the  conditions  seem  to  favor  bet- 
ter time.*,  yet  there  seem  fatal  barriers  to  their  return.  We  have 
had  years  of  marvelous  production,  and  of  good  prices  for  the  pro- 
ducts of  the  earth;  the  figures  indicating  the  value  of  exports  were 
never  so  large  or  satisfactory — this,  too,  in  the  face  of  restricted 
Imports,  indicating  an  economy  on  the  part  of  the  people  which 
OUfjht  ere  this  to  have  borne  better  results.         ***** 

"Yet  the  experience  of  the  past  does  not  permit  the  hope  that  all 
this  will  bring  around  a  prosperous  or  satisfactory  trade.  Something 
more  is  needed;  but  xohatthe  true  remedy  is,  none  have  yet  discovered. 
Numerous  explanations  are.  of  course,  at  hand;  and  it  is  eloquently 
urged  that  the  adoption  of  this  or  that  policy  would  restore  coufi- 


THE  PRESENT  CRISIS.  325 

dence  and  prosperity  Yet  the  fact  remains  that,  in  the  presence  of 
all  favoring  coiulitions,  depression  reigns,  values  decline,  and  busi- 
ness is  restricted  and  unprofitable.  Judging  from  the  state  of 
business  abroad,  all  this  is  not  chargeable  to  the  peculiar  disabilities 
under  which  this  country  labors.  Other  nations  loith  a  gold  basis,  a 
low  tarifl",  aud  not  chargeable  with  either  public  or  private  extrav- 
agance, are  sutl'ering  even  to  a  greater  extent  than  the  United 
States,  with  an  absence  of  many  of  the  advantages  and  prospects 
whicli  this  nation  enjoys  " 

Commentini!:  on  the  same  unanswerable  evidences  of 
the  great  depression  of  business,  the  Missouri  Repub- 
lican, of  January  21st,  1878,  said: 

"According  to  the  figures  presented,  the  failures  in  the  United 
States  for  the  year  1877  are  8,872  in  number,  being  220  less  than  for 
1876,  in  which  3'far  they  were  9,092.     The  total  liabilities  for  1877 
are  stated  at  f  190  GG9,000  as  against  $191,117,000  in  1876,   or  barely 
half  a  million  of  dollars  less.    For  the  three  quarters  ending  with  Sep- 
tember hist,  the  number  of  failures  had  lessene<l  by  495.  with  a  de- 
cline in  liabilities  of  $4,320,0 '0   as  compared  witli  a  similar  period 
in  1875,  but  the  casualties  of  the  last  quarter  have  been  so  numer- 
ous and  important,  that  the  ratio  of  improvement  for  the  fir>t  nine 
months  lias  not  been  sustained.     So  frequent  of  late  have  been  the 
announcement  of  suspensions  and  so  much  has  occurred  in  the  last 
few  months  to  impair  confidence  that  it  is  all  the  more  gratifying  to 
know  lliat  the  figures  for  ttie  whole  year  do  show  a  decreased  num- 
ber of  disasters,  with  losses  somewhat  less.     The  agency,  however, 
says  it  is  a  pregnant  fact,  illustrative  of  the  general  condition,  that 
the  failures  of  the  past  year  approach  so  nearly  those   of  the    year 
preceding,  which  were  deemed  very  excessive,  and  that  the  failures 
are  really  above  the  avera;:e  of  the  four  years  since  the  panic  of  1873. 
Time  does  not  seem  to  improve  these  statistics  with  tlie  same  rapid- 
ity that  it  did  subsequent  to  the  panic  of  1857  or  1861,    for  in   the 
four  years  succeeding  these  dates,  the  number  of  failures  and  the 
amount  of  liabilities  steadily  diminished,  the  average  rapidly  decliu- 
ing,  while  this,  the  fourth  year  since  the  panic  of  1873,  largely  in- 
creases the  average.     Tills  is  illustrated  by  the  figures  in  detail  for 
the  periods  referred  to,  and  the  comparison  thus  instituted,  is  made 
specially  interesting  as  grouping  the  few  years  preceding  the  panic 
of  1873  opposite  the  four  years  succeeding.     The  average  number 
of  failures  for  the  four  years  prior  to  and  including  1873  was  3,929, 
wliile  for  the  four  years  ending  with  1877,  the  yearly  average  num- 
ber is  7,883.     In  1871,  for  inst.mce,  the  failures  Avere   ouly   oue   to 
every  163  traders,  while  in  1877  the  ratio  is  one  in  every  73.     The 
average  total  yearly  liabilities  prior  to  and  including  1873  were  $130,- 
000,000:  the  yearly  average  for  the  four  years  subsequent  is  $184,- 
000,000. 

These  great  journals,  as  well  as  others,  comment  on 

the  appalling  increase  of  bankruptcies  from  1866  to 

1877  as    phenomena    strange,    mysterious,    and    un- 


326        MONETARY  HISTORY  OF  THE  UNITED  STATES  : 

accountable  !  But  a  much  stranger  thing  is  that  they 
— the  educators  of  the  masses — should  be  ignorant  of 
the  causes  which  produced  and  perpetuate  bankruptcy. 
Money  makes  commercial  values,  prices.  From  1866 
to  the  present  time  a  continued  lessening  of  the  volume 
of  money  has  been  going  on.  With  this  reduction  in 
the  amount  of  money,  and  produced  by  it,  has  moved 
a  continuing  shrinkage  of  values  and  shriveling  of 
profits,  until  business  has  come  to  a  point  where  there 
is  scarcely  any  profit  in  it.  The  people  of  this  country 
have  been  doing  business  for  ten  ^^ears  with  a  constant- 
ly shrinking  volume  of  money  on  constantly  declining 
markets.  Is  it  strange  that  bankruptcies  have  multi- 
plied ?  It  is  only  strange  that  they  have  not  increased 
more  rapidly. 

Hon.  Henry  Gary  Baird,  in  a  pamphlet  entitled 
Turkey  and  the  United  States,  issued  in  1877,  says : 

"THE   UNITED   STATES. 

"CoxDiTiox  OF  THE  SOUTHERN  STATES.— Turning  now  to  the  Uni- 
ted States,  we  shall,  perhaps,  be  asked,  what  has  this  country  in  om- 
niou  with  Turkey  as  here  depicted?  We  an  wer,  that  almost  the  en- 
tire Si'Uth  presents  a  picture  very  nearly  identical  with  it— an  almost 
total  abscence  of  manufa^  tures  and  the  mechanic  arts;  a  barbarous 
and  exhaustive  system  of  culture;  bankrupt  State  treasuries,  cor- 
porations, individuals;  excessive  rates  of  interest;  taxation  which 
amounts  to  conh-cation,  and  has  already  confiscated  thousands  of 
onoe  valuable  estates;  corrupt  and  irrespou>ible  governments;  wide- 
spread pauperism  and  ignorance,  and  a  general  tendency  of  sochty 
to  become  once  more  resolved  into  its  elements.  The  saddest  part 
of  I  his  sad  picture  is  the  reflection  which  it  brings  with  it,  that  after 
passincr  through  one  great  war  by  reason  of  the  South  being  almost 
entirely  devoid  of  diversified  industric'S,and  consequently  of  a  power 
of  association  that  creates  tliat  constant  demand  for  labor  which 
makes  for  the  laborer  a  free  and  intelligent  being,  that  country  is 
to-day,  in  almost  every  respect,  in  a  worse  condition  than  it  was  ia 

18«0.  ,        ,     ,        . 

"We  have  abolished  chattel  slavery,  and  yet  enslaved  almost  a 
whole  people,  whitr  as  well  as  buick.  Without  that  great  middle 
class  which  is  the  broad  basis  upon  which  alone  a  free  government 
can  permanently  endure,  the  South  must  ever  be  to  the  United 
States  a  source'of  weakness  and  discord,  and  to  itself  a  scene  of 
misery,  wretchedness,  and  ignorance. 


THE  PRESENT  CRISIS.  327 

"While,  like  Turkey,  the  demand  for  revenue  in  most  of  the  South- 
ern States  lias  iu;rowu  with  each  succeeding  year;  we  need  hardly 
be  surprised  tliat  taxation  and  confiscation  in  several  of  these  States 
are  almost  synonymous  terms.  The  rate  (m  realpstate  in  Louisiana, 
Arl^ansiis,  Mississippi,  and  others  is  about  G  per  cent.;  and.  we  are 
told,  that  tlie  valuation  of  real  and  personal  property  had,  between 
18G0  and  1870,  declined  in  Virginia  and  West  Viririnia  from  §7t»3,- 
247, ()S1  to  ^G00,2:yj,C>2i;  North  Carolinia,  from  $2!)2, 277,012  to  ^132,- 
04«,3',»0;  i»  South  Carolina,  from  $489,310,128  to  .1JIG4,401»,!»4G;  in 
Louisiana,  from  $435,000,000  to  $2.")0. 000,000;  in  Mississippi,  from 
$509,472,912  to  $154,535,547  ;  in  Alabama,  from  $450,000,000  to  $155,- 
000,000.  But  we  shall  be  told  that  the  waste  of  war  and  the  freeing 
of  the  slaves,  which  were,  in  18G0,  included  in  ihese  valuations, 
should  be  taken  into  account.  To  this  the  reply  is,  that  in  the  live 
years,  from  18G5  to  1870,  with  even  a  moderate  degree  of  prosperity, 
all  of  the  States  would  have  been  enabled  to  have  restored  their  prop- 
erty at  least  to  what  it  stood  atin  18G0;  the  increase  in  Pennsylvania, 
for  instaiicc,  between  18G0  and  1870,  being  from  $1,416,501,818  to 
$3,808,340,112. 

•  "By  wise  administration  France  has  so  far  recovered  from  her 
late  war — which  was  estimated  to  have  cost  the  State  alone  over  $2,- 
000,000,000,  and  agriculture  in  addition  $850  000,000— as  to  have 
placed  herself  in  the  position  of  being  the  most  prosperous  of  all 
the  nations  of  the  earth. 

"But  the  loss  of  slave  property  and  the  waste  of  war  will  hardly 
account  for  the  fact  that  in  Louisiana,  a  plantation  of  1,G00  acres  in 
one  of  the  most  fertile  sections,  once  valued  at  $100,000,  could  not. 
in  1874,  be  sold  for  $1,G00;  or  that  another  of  600  acres,  which  orig- 
inally cost  $30,000,  was,  about  1874,  offered  for  $700;  or  that  in 
New  Orleans,  a  house  which,  in  18G8,  was  worth  $12,000,  Avas  alittle 
later  sold  for  $8,000,  and  then  for  $G,000 ;  and  that  in  1874  no  one  could 
be  found  to  take  it  at  $4  OUO;  or  that  the  Sheriff  of  New  Orleans  has 
become  the  prosperous  man  of  the  city,  his  office,  in  the  midst  of 
the  ruin  by  which  he  is  surrounded,  being  worth  $G0,000  per  annum. 

"The  waste  of  war,  which  was  closed  in  18G5,  and  emancipation 
will  hardly  account  for  the  fact  tliat  in  South  Carolina,  Mauds  that 
were  held  before  the  war  at  twenty-five  and  thirty  dollars  an  acre, 
and  cheap  enough  at  that,  can  now  be  had  at  two,  three,  four,  five, 
and  ten  dollars  an  acre.  These  lands  are  in  working  order  and 
need  only  good  farming  to  make  them  more  profitable  than  they  ever 
were;'*  or  'that  the  largest  half  of  the  population  of  South  Carolina 
live  to-day  in  huts  and  hovels,  so  poor  that  their  total  destruction, 

"*The  New  York  Tribune,  of  April  16th,  1877,  iincler  the  heading  of  'Wrecked 
by  Ileal  Estate,' says:  A  reporlcr  of  the  Tribune  recently  had  a  long  inter- 
view with  a  gentleman  who  has  been  clo.sely  identilled  Mith  the  ups  and 
downs  of  the  market  during  the  past  few  years.  'It  is  a  frightful  retrospect,' 
he  said,  'but  as  a  warning  to  those  wlio  again  may  desire  to  s|.)ecuJate  in  unim 
proved  property,  the  whole  story  ought  to  be  told.  It  is  not  necessary  to 
give  names:  the  facts  will  speak  for  tliemselves,  and  those  at  all  acquainted 
with  our  innrket  will  at  once  be  able  to  identify  the  bodies,  when  I  come  to 
call  the  roll  of  the  killed  and  wounded.  *  *  *  xhe  masses  of  the 
people,  who  imagine  that  they  alone  h.ive  suffered  during  tliese  hard  times, 
would  open  their  eyes  if  they  could  understand  the  misfortunes  sustained 
during  the  past  four  years  by  many  of  the  formerly  wealthy  families  of  New 
York,  and  see  how  changed  are  the  circuiastauces  and  surroundings  ia  which, 
they  are  now  living.' 


328        MONETARY  HISTORY  OF  THE  UNITED  STATES  : 

from  one  end  of  the  State  to  the  other,  would  not  diminish  the  tax- 
able value  of  the  State  one-tenth  of  one  per  cent.,'  being  'worth  no 
more  than  so  many  dog-kennels  or  pig-sties.'* 

"But  we  shall  doubtless  be  told  that  Louisiana  and  South  Carolina 
have  for  years  been  under  the  combined  rule  of  the  negro  and  the 
carpet-bagger,  and  that  this  fact  alone  is  sufficient  to  account  for 
their  sad  condition.  Let  us,  then,  turn  to  Virginia  and  Tennessee, 
two  States  which  have  now  for  several  years  both  enjoyed,  in  a  great 
degree,  immunity  from  these  blighting  influences;  States,  too,  of 
magniflcient  natural  resources,  which  only  need  to  be  developed  in 
order  to  extend  prosperity,  happiness,  contentment,  and  civilization 
into  every  nook  and  corner  of  their  wide  domains. 

"Virginia,  with  a  territory  of  38,348  square  miles,  and  in  1870  a 
population  of  1,22.5,163,  hus  to-day  a  funded  debt  of  $29,489,326,  the 
annual  interest  charge  on  which  is  $1,951,175.  The  expenses  of  the 
State  Government  for  1876,  exclusive  of  interest  on  the  debt,  were 
but  $1,5.56,715— showing  a  remai-kably  economical  administration  of 
public  affairs ;  and  yet  the  due  and  unpaid  interest  on  this  debt  De- 
cember, 1876,  was  $3,510,834.  That  such  a  body  of  people  inhabit- 
ing such  a  territory,  should  be  unable  to  support  such  an  economical 
government,  and  pay  such  an  annual  interest  on  its  deljt,  shows  an 
absence  of  the  utilization  of  its  resources  which  is  disgraceful  to  the 
general  government  under  which  they  live.  But  that  their  difficul- 
ties must  increase  rather  than  decrease  will  be  indicated  by  the  fact 
that  while  in  1873,  in  Virginia  and  West  Virginia,  the  mercantile 
failures  were  125,  and  the  debts  $2,188,000,  in  1876  the  failures 
were  172,  and  the  debts  $3,381,289.  It  need  hardly  be  added  that 
this  is  not  the  road  which  leads  to  the  payment  of  the  interest  or 
principal  of  this  debt;  but  that  it  leads  to  repudiation,  no  matter 
how  great  the  pride  or  how  high  the  tone  of  the  debtors;  for,  in 
justice  to  this  ancient  Commonwealth,  it  must  be  said  that  the  Ex- 
ecutive shows,  in  his  late  message,  the  most  honorable  anxiety  about 
the  discharge  by  tlie  State  of  all  her  just  obligations. 

"Turning  now  to  Tennessee,  we  find  a  population  of  l,258,!i20,  in- 
habiting one  of  the  most  magnificent  territories  in  the  world,  42,- 
000  square  miles  in  extent,  of  genial  climate,  abounding  in  the  finest 
agricultural  lands,  and  possessed  of  wonderful  mineral  resources; 
coal  and  iron  especially  being  inexhaustible  in  supply.  This  State 
has  a  funded  debt  of  .$23,203,400,  on  which  there  is  now  due  and 
unpaid  eighteen  months'  interest,  or  $2,088,756.  How  unlikely  she 
is  to  increase  her  ability  to  discharge  this  debt,  interest  or  princi- 
pal, while  on  the  road  she  is  now  made  to  travel,  will  be  seen  and 
appreciated  when  it  is  considered  that  the  taxable  property  in  the 
State,  which  was  in  1873  valued  at  $308,089,738,  had  in  1876  fallen 
to  $268  002,485;  and  that  the  failures,  which  in  1873  were  77,  with 
liabilities  of  $1,036,000,  had  in  1876  swollen  to  158,  with  liabilities 
of  $2,229,553. 

'Even  in  the  State  of  Georgia,  now  for  years  under  the  control  of 
its  white  population,  and  with  fuller  developed  industries  than  most 
of  the  other  Southern  States,  land  is  so  nearly  without  value  that  no 

"*The  New  York  Tribune  has  recently  expressed  the  opinion  that  either  the 
debt  of  the  city  of  New  York  must  be  repudiated,  or  the  entire  real  estate  in 
that  city  pass  Into  the  hands  of  new  holders  at  lower  prices. 


THE  PRESENT  CRISIS.  329 

money  can  be  borrowed  on  it  on  mortgage ;  aiui  cases  liave  been 
known  where  UKjrtgagees  liave  preferred  to  abandon  their  claims 
entirely  to  foreclosing  their  mortgages,  because  they  did  not  wish 
to  be  incumbered  with  the  lands,  their  taxes,  and  other  responsibili- 
ties. No  l)et,ter  test  of  a  decline  in  civilization  in  any  coumiunity  or 
country  can  be  hati  tlian  a  decline  in  the  value  of  its  lands — man  in- 
variably declining  with  a  fall  in  the  vaku'  of  huul. 

"The  CoNDiriox  ok  the  Nouthekn  States  and  of  the  Union 
UENKKALLY. — But  wc  may,  perhaps,  be  told  tliat  all  of  these  South- 
ern States  have  been  over-run  and  plundered  by  hostde  armies,  and 
have  furthermore  undergone  a  revolution  in  tlieir  labor  system;  and 
that  this  condition  of  prostration  was  therefore  to  have  been  looked 
for.  Let  us,  then,  turn  to  the  contemplation  of  the  North,  and  of  the 
nation  at  large 

"In  187G,  the  failures  in  the  loyal  States  were  7,972,  with  liabilities 
amounting  to  .$  174, (jt)3, 712;  and  tliose  in  the  States  lately  in  re- 
bellion 1,120.  with  liabilities  of  f  l(J,4r2-t,07-l ;  or  a  total  of  liabilities 
of  $191,117,780;  there  being  one  failure  for  every  ()3  persons  in  busi- 
ness. In  the  four  years,  1873  to  1870  inclusive,  the  liabilities 
amounted  to  the  enormous  sum  of  $775,910,130. 

"New  YoKK  ANi>  OTHER  CITIES. — According  to  estimates  of  the 
Tax  Commissioners  of  New  York  City,  the  actual  value  of  real  es- 
tate in  that  city  has  declined  from  $1,39-1,488  900,  in  1873,  to  $892,- 
428,103,  in  1870,  or  $i02  000,803;  while  it  was  assessed,  for  tlie  pur- 
poses of  taxation,  at  $05,000,000  higher  in  the  last  named  than  the 
former.*  In  1873,  tlie  total  value  of  the  personal  property,  exclu- 
sive of  bank  stock,  assessed  in  that  city,  was  $215,000,000,  while  in 
1870  it  had  fallen  to  $133,500,000— a  decline  of  $81,500,000.  At  the 
same  time  the  puljlic  debt  of  that  city  December  3Ist,  1872,  was 
$95,407,154,  while  December  31st,  1870,  it  was  $127,919,993  net.f 
While  the  transactions  of  the  clearing  houses  of  twelve  of  the  prin- 
cipal cities  of  tlie  United  States,  which  includes  312  banks,  were,  in 
1875,  $31,292,000,000,  in  1870  they  were  but  $28,234,000,000— a  de- 
cline of  9.8  per  cent  ,  and  $5,738,000,000  less  than  those  of  New 
York  City  alone  in  1873.  For  the  fiscal  year  ending  June  30th,  1873, 
the  total  net  receipts  of  the  government  of  tlie  United  States,  exclu- 
sive of  loans,  were  $333,738  204;  while  for  the  year  ending  June 
30th,  1870,  with  increased  taxes  on  many  articles,  they  were  but 
$287,482,039 -a  decline  of  over  $40,250,105;  and  the  late  Secretary 
of  the  Treasury,  Mr.  Morrill,  in  his  report  on  tlie  Finances,  in 
Decemlier,  1870.  acknov/ledged  his  inability  any  longer  to  provide 
for  tlie  sinking  fund.* 

"The  Unemployed.— From  statistics  gathered  from  trades-uu- 


"*This  re.«ult  was  foreshadowed  bpfore  the  crisis  of  1,S73,  by  an  able  Eng- 
lish writer— the  author  of 'The  Bank  Charter  Act  and  tlie  Rate  of  l:Ut>re.st.' 
LiMid.  187.'}:  '  To  us,'  ho  says,  -it  is  indeed  a  rnelanrliolf/  rcjlectioti,  and  one 
Vfithal  tvorthy  of  fir  ace  pondering ,  that  when  the  United  Stdtcs  shall  return  af/ain 
to  a  convertible  currenci/,  the  liqaidation  of  this  nation  di'bt  mast  cease.  Our  own 
Sinkiuff  Fund,  derisedfor  a  similar  ohje  t,  we  knoiv,  ceased  to  receive  any  ini/iort- 
ant  payments  after  the  abrogation  of  the  bank  restriction  act.  No  currency, 
doubtless,  but  one  that  tons  able  to  SUSTAIN  a  greater  war,  need  be  expected  to 

LiyniOATK  ITS  COST.' 

'•jThe  i)hilosoi)hy  which  explains  these  facts  is  simple;  the  subordination  of 
commerce  to  it.s  instrument,  money,  in  destroying  the  i)o\ver  of  as.sociutioa 
among  the  people,  of  necessity  destroys  their  ability  to  contribute  to  the 
reveiiues  of  the  State. 


330     MOXETARY   HISTORY    OF   THE   UNITED    STATES  : 

ions,  and  other  reliable  sources,  it  is  estimated  that  there  are  over 
45.000  skilled  workman  out  of  employment  in  the  city  of  New  York; 
while  the  mayor  of  Chicago  recently  expressed  the  opinion  that  in 
the  latter  city  there  were  50,0' '0  people  without  work.  During  the 
month  of  December  last,  in  Philadelphia,  outdoor  relief  was  grant- 
ed by  the  authorities  to  16,637  persons;  while  January  20th,  1877, 
there  were  4,249  inmates  in  the  Almshouse  of  that  city,  and  2,116  in 
the  House  Correction,  making  in  the  two  institutions  6,365  paupers, 
vagrants,  and  drunkards.  In  the  once  prosperous  and  happy  city  of 
Newark,  N.  J.,  one-eighth  of  the  entire  population  was,  in  January 
last,  depending  on  public  charity 

"Ix  THE  Words  ov  ax  Eximext  Americ\x  Writer. — Laborers, 
skilled  and  unskilled,  abound,  vainly  seeking  to  sell  their  labor, 
and  mth  the  proceeds  to  pay  for  food  and  clothing  for  their  wives 
and  children.  Banks  and  savins  funds  are  everywhere  being  ruined. 
Thousands  of  millions  of  capital  invested  in  coal  mines,  iron  works, 
factories  and  railroads,  are  idle,  yielding  nothing  to  their  owners. 
Everywhere  mortgages  are  being  foreclosed,  and  the  unfortunate 
debtor,  turned  adrift,  seeks  in  vain  for  lodgings,  for  either  wife  or 
child." 

The  total  number  of  deaths  in  the'  United  States  for 
the  year  1860  was  374,022,  and  for  1870  they  were 
492,263,  as  shown  by  the  ninth  census  report — an  in- 
crease of  118,241,  or  about  32  per  cent,  for  the  year 
1870  over  that  of  1860,  when  tlie  increase  of  popula- 
tion was  only  about  22  per  cent. 

The  total  assessed  value  of  all  property  in  all  the 
States  and  Territories  in  1860  was  $12,084,560,- 
005,  and  in  1870  it  was  $14,178,986,732— an  in- 
crease for  1870  over  that  of  1860  of  $2,094,426,- 
727,  or  about  17^  per  cent. — equal  to  an  increase  of 
not  quite  If  per  cent,  a  year.* 

But  the  values  of  real  estate  have  greatly  depreciated 

*The  Chief  of  the  Bureau  of  Statistics  estimated  the  entire  wealth 
of  the  country  at  §30,000,000,000  for  1870,  but  his  method  of  arriv- 
ing at  this  estimate  is  not  at  all  reliable,  as  any  one  may  see  who 
reads  his  explanatory  notes  on  page  636  et.  seq.  of  compendium  of 
the  ninth  census  of  the  United  States.  Doubtless  the  assessments 
as  returned  by  the  county  and  state  officers  do  not  show  the  exact 
wealth  of  the  country,  but  their  returns  are  I^y  far  the  most  authen- 
tic that  can  be  had.  It  is  said  they  assess  too  low.  If  this  be  true, 
it  would  apply  to  the  assessment  of  1860  as  well  as  to  that  of  1870, 
and  the  per  cent,  of  increase  or  decrease  of  wealth  would  not  be 
changed  by  that  fact. 


THE  PRESENT  CRISIS.  331 

all  over  the  United  States  since  1870.  Tliis  deprecia- 
tion has  been  variously  estimated.  We  believe  it  to  be 
over  75  per  cent.,  but  in  the  following  calculation  put 
it  only  50  per  cent.  The  total  assessed  value  of  real 
estate  for  1870  was  $9,914,780,825.  Add  to  this  25 
percent,  foj*  undcr-assessnient  audit  would  be  $12,- 
393,486,031.  Deduct  from  this  sum  50  per  cent,  de- 
cline since  1870,  it  gives  $8,262,350,687  as  the  present 
true  value  of  all  the  real  estate  in  the  United  States. 
The  assessed  value  of  all  the  real  estate  in  the  United 
States  for  1860  was  $6,973,006,049,  Add  to  this  25 
per  cent,  for  under- valuation  and  it  gives  $8,716,257,- 
561  as  the  true  value  of  real  estate  in  that  year — $453,- 
906,874  more  than  its  present  worth. 

The  assessed  value  of  all  the  personal  property  in  the 
United  States  for  1870  was  $4,264,205,907.  Add  to 
this  25  per  cent,  for  under-value  and  it  gives  $5,330,- 
257,383  as  the  true  value  of  the  personal  estate  m 
1870.  But  prices  of  personal  property  have  declined 
since  that  date  on  an  average  over  50  per  cent.  De- 
duct 50  per  cent,  decline  since  1870  and  we  have  $3,- 
553,504,922.  But  United  States  bonds  are  not  taxed. 
Add  $700,0(10,000  of  them  owned  in  the  United  States 
and  it  gives  $4,253,504,922  as  the  true  present  value 
of  all  personal  property  in  the  United  States.  The 
assessed  value  of  all  the  personal  property  in  the 
United  States  in  1860  was  $5,111,553,956.  Add  25 
per  cent,  for  under-valuation  and  it  gives  $6,389,442,- 
245  as  the  true  value  of  all  the  personal  property  in 
the  United  States  in  1860— $2,135,937,323  more  than 
its  present  value. 

It  may  be  said  that  the  freeing  of  the  slaves  of  the 
South  since  1860  is  the  cause  of  the  decrease  of  ag- 


332       MOXETAEY  HISTORY  OF  THE  I'MTED  STATES  : 

gregate  value  of  all  personal  property,  but  we  answer, 
that  the  enormous  increase  of  state,  municipal  and  cor- 
porate bonds  which  have  been  issued  since  1860,  and 
which  are  returned  in  the  assessors'  list,  together  with 
the  o-overnment  bonds  above  added  to  the  assessment, 
will  more  than  offset  the  destruction  of  assessed  values 
by  reason  of  emancipation  of  the  slaves. 

These  figure  show  a  total  depreciation  of  values  of 
all  the  property  in  the  United  States  in  1877  below 
that  of  1860  of  $2,598,844,197— equal  to  a  decrease  of 
nearlv  22  per  cent,  during  17  years,  or  l/y  per  cent, 
per  annum  I  Is  this  strange  ?  Not  at  all,  Avhen  viewed 
in  the  lisht  of  existinir  facts.  Taxes  have  trebbled, 
debts  more  than  quadrupled,  and  the  amount  of  money 
in  circulation  among  the  people  is  less^er  capita  than  in 
1860.  Deducting  $60,000,000  coin  held  In-  banks  as 
reserves  in  1860,  the  amount  of  money  then  in  actual 
circulation  among  the  people  was  about  $422,000,000, 
or  $14x5  P^r  capita. 

The  total  amount  of  paper  mone}^  of  all  kinds, 
too-ether  with  the  subsidiary  coins  and  $15,000,000  of 
coin  circulating  in  the  Pacific  States  and  Territories, 
now  outstanding,  is  about  $732,000,000.  Deduct  from 
this  $210,000,000  held  as  reserves  by  banks,  as  re- 
ported hY  the  Comptroller  of  the  Currency  for  1877, 
and  it  ""ives  $522,000,000  of  monev  circulating  among 
the  people,  or  %ll^^  per  capita,  estimating  the  popula- 
tion at  46,000,000.  This  is  nearly  $3  less  per  capita 
than  the  people  had  in  18t)0  !  And  yet  there  are  men 
in  this  country  whose  heads  are  so  empty,  or  cheeks  so 
hard,  that  they  unblushingly  exclaim,  "There  is  a 
plethora  of  money  !  " 

The  total  state,  municipal   and  county  taxation  for 


THE   PRESENT    CRISIS.  333 

the  year  1860  was  $94,186,746  ;  for  1870  it  was  $280,- 
591,521 — an  increase  of  300  per  cent.,  and  the  increase 
has  continued  to  progress  since  1870.  Besides  this, 
the  federal  taxes  have  increased  over  400  per  cent, 
durino;  the  same  time. 

Statement  of  the  conditions  of  the  raih'oads  in  the 
United  States  in  1876  and  1877,  showing  immense 
losses  : 

The  Railway  Age,  of  Chicago,  stated  on  Feb.  22nd, 
1877,  that  eighty-six  railroads  had,  during  the  year 
1876,  met  with  disaster  as  follows  : 

No.  of  roads.     Mileage.  Capital  invested. 

Sold  under  foreclosure 30 3846 $217,848,000 

Keceivers  appointed,  or 

foreclosures  commenced 4G 7576 538,000  000 

New  defaidts 10 2577 156,6(;i,000 


Grand  total 86 14,178 $912,509,000 

The  same  paper,  under  date  of  March  22nd,  1877» 

says  : 

'<  Out  of  a  total  nominal  investment  of  the  railroads  of  this  coun- 
try of  $4,775,000  000.  about  38  per  cent.,  or  $1,800,('00,000,  is  repre- 
sented in  defaulting  roads,  and  is  therefore,  fm-  the  present  at  least, 
almost  wholly  unproductive  to  the  investors." 

And  on  the  same  date  says  : 

"The  losses  incurred  by  the  shrinkage  of  the  stock  of  the  four 

principal  coal  roads  within  the  last  year  are  appalling,  as  shown  by 

tiie  following  table : 

Value 
Railroads.  March  8,  1876.    Present  value.     Shrinkage. 

Central,  of  New  Jersey     $21,',)61,750..$  1,724,645.  .$20,217,125 

Dela.,  Lackaw;ina&  Western.  31178,000..  17.423  0('0..  13,753,000 
Delaware  &  Hudson  Canal  ...  24,000,000..  10,400,000..  13,600,000 
Reading   32,863,000..     4,251,000..    28,612,000 


Total 110,003,250..    33,818,625..    76,184.625 

"Add  to  this  $76,000,000  of  loss  the  depreciation  upon  the  bonds 
of  the  companies,  and  the  estimate  that  the  total  apparent  loss 
caused  by  the  coal  panic  M'ithin  a  year  will  reach  one  hundred  mil- 
lion of  dollars  is  not  far  from  correct." 

And  adds  : 

"The  loss  of  nearly  $8,000,000  in  annua!  dividends  by  the  stock- 


334         MONETARY  HISTORY  OF  THE  UNITED  STATES  .' 

holders   of  the  four  roads   named   is   a  calamity   of  wide-spread 
effect." 

Table  of  the  average  ratios   of  earnings  to  capital 

and  surplus,  of  National  Banks  from  March,  1873,  to 

Sept.  1st,  1877  : 

1873 5.5  per  cent.     187(i 3.2  per  cent. 

187-i 4.1)  "   "      1877 2.5  "   " 

1875 -AG  "   " 

The  foregoing  table  shows  a  decline  of  over  100  per 
cent,  since  1873,  and  a  decline  of  nearly  100  per  cent, 
since  the  passage  of  the  Resumption  Act. 

Bank  losses  for  1876  and  1877,  as  reported  by  the 
Comptroller  of  the  Currency,  pages  34  and  35  of  re- 
port for  1877  : 

Amount  March  1.         September  1.  Total. 

Totallosses  for  1877 J6,17.o,960  56 $ll,7.i7,627  4:3 $19,0?,:5,5S7  99 

Tot^l  losses  for  1876 6,501,169  82 13,217,856  60 19,719,026  42 

Increase  of  losses  of  1877  over  those  of  1876 f     214,561  57 

The  Ninth  Census  Report  shows  that,  on  June  1st, 
1860,  the  number  of  persons  in  prison  in  all  the  States 
was  19,086.  On  June  1st,  1870,  they  were  32,901— an 
increase  of  13,815,  or  72  per  cent.,  while  the  popula- 
tion increased  only  22  per  cent.  The  number  of  pau- 
pers for  1860  and  1870,  reported  in  the  Ninth  Annual 
Census,  is  utterly  unreliable  for  the  purposes  of  com- 
parison, as  will  be  seen  by  explanatory  notes  on  page 
563  of  the  report.  The  annual  cost  of  support  of 
paupers  is  more  reliable.  It  was  $5,445,143  for  the 
year  ending  June  1st,  1860,  and  $10,930,429  for  the 
year  ending  June  1st,  1870 — an  increase  of  $5,485,286 
— 100  per  cent,  for  the  year  1870  over  that  of  1860, 
when  the  increase  of  population  was  but  22  per  cent. 
The  increase  of  pauperism  is  now  very  rapid. 

List  of  heavy  embezzlements,  condensed  from  the 
:N.  Y,  jSuji  of  Jan.  1st,  1878  : 


THE   PRESENT    CRISIS.  335 

Year.  No.  Embezzlers.  Amounts  embezzled. 

1873 27 §  3,4G0,007 

1874 59 2,0(;8,839 

1875 45 !), 297,331 

187G 59 3,808,048 

1877 122 12,577,951 

Showiiii!-  a  G-reat  increase  of  that  class  of  crimes. 

Following  is  a  table  of  the  total  net  revenue  of  the 
United  States,  from  18GG  to  1876,  inclusive: 

Year.  Net  revenue.  Year.  Met  revenue. 

1866 .$558,032,620  06  1872 $374,106,867  5G 

1867  490,634.010  27  1873 333,738  204  67 

1868 405  638,083  32  1874 289,478,755  47 

1869 370,943.747  21  1875 288.000,051  10 

1870 411,255,477  63  1876 287,482,039  16 

1871 383,323,944  89 

A  constant  and  rapid  decrease   of  revenue  without  a 
corresponding  reduction  of  the  rate  of  taxation. 

Followinir:  is  a  table  of  the  net  inimiijration  to  the 
United  States  for  the  five  years  ending  June  30,  187(>, 
taken  from  the  Annual  Eeport  of  the  Chief  of  the  Bu- 
reau of  Statistics  for  that  year  : 

Years  ended  Net  immigration, 

June  30,  1 872 404  806 

June  30,  1 873 459,803 

June  30,  1874 313,339 

June  .30,  1 875 227,498 

June  30,  1876 169,986 

Table  of  net  emiijration  from  the  United  States  for 
the  five  years  ending  December  31st,  1875,  taken  from 
the  Annual  Report  of  the  Chief  of  the  Bureau  of  Sta- 
tistics for  that  year  : 

Years  ended  Net  emigi-ation. 

Decemhor31,  1871 21,367 

December  31,  1872 45,323 

December  31,  1873 70,188 

December  31,  1874 92,635 

December  31,  1875 71,725 

The  above  tables  exhibit  a  decrease  of  immi2:ration  to 

the  country  of  over  100  per  cent,  since  1872  and  1873, 

and  an  increase  of  emigration  from  the  country  of  over 

300  per  cent,  since  1871.     Perhaps  no  truer  indication 


336     MONETARY    HISTORY    OF    THE    UNITED    STATES  : 

of  the  decline  of  our  prosperity  exists  than  the  facts 
exhil)ited  in  tliese  tables  of  immio-ration  and  emiora- 
tion. 

Hon.  Chas.  S.  Hill,  of  New  York,  states  the  decline 
of  our  shipping  interests  as  follows  : 

"In  order  to  give  an  idea  of  the  retrograde  movement  of  our  ship- 
ping interests,  let  us  compare  tlie  following  proportionate  value  of 
foreign  trade  as  transported  in  1857  and  1867  : 
1857.  To  and  from  New  York  City  in  American  ships.  ...$239,565,610 

"       To  and  from  New  York  City  in  Foreign  ships 104,354,6Sl 

And  in 

1867.  To  and  from  New  York  City  in  American  ships. . .    113  313,303 

"      To  and  from  New  York  City  in  Foreign  sliips 371,849,274 

And  for 

1857.  To  and  from  all  our  ports  in  American  ships 510,000,000 

"       To  and  from  all  our  ports  in  Foreign  ships  only..    213,000,000 
Or  double  in  favor  of  American  tonnage. 
In 
1867.  To  and  from  all  our  ])orts  in  American  ships 296.000,000 

"       To  and  from  all  our  ports  in  Foreign  ships 580,000,000 

Or  double  in  favor  oi  foreign  tonnage. 
And  in 
1877.  To  and  from  all  our  ports  in  American  ships 280,000,000 

"       To  aud  from  all  our  ports  in  P'oreign  ships 770,000,000 

Which  shows  a  startling  increase  of  foreign  tonnage." 

And  a  decrease  of  our  own  of  nearly  half  in  20  years. 
Thus  it  appears  that  every  material  interest  of  the  na- 
tion is  in  a  state  of  rapid  decay.  In  the  last  ten  years 
the  values  of  all  property,  both  real  and  personal,  have 
fallen  from  50  to  100  per  cent.,  and  the  shrinkage  con- 
tinues slowljs  but  steadily  and  surely. 

Industrial  shops,  manufactories,  and  mines  have 
closed  by  the  hundred  ;  mercantile  and  trading  classes 
are  becoming  bankrupt  by  thousands ;  although  the 
earth  yields  bountifully  to  the  husbandman's  culture, 
yet  his  abundant  crops  are  almost  consumed  in  freight- 
ing the  grain  to  market,  his  labors  go  uncompensated, 
and  each  year  l)rings  him  harder  toil,  harder  living,  and 
greater  distress  ;  the  land  owner's  rents  diminish  an- 
nually and  his  substance  is  eaten  up  with  taxes  or  his 


THE  PRESENT  CRISIS.  337 

estates  sacrificed  at  mortgai^cc's  sales  ;  laborers  stroll 
idly  through  the  streets  of  cities  and  trainj)  the  high- 
Wixys  of  the  country  anxiously  but  vainly  looking  for 
employment ;  hundreds  of  millions  of  railroad  stocks 
arc  sacrificed  at  mortgage  sales,  and  the  shipping  in- 
terests of  the  country  are  swept  from  the  seas.  Every 
business  man  in  the  countr}^,  the  merchant,  the  shop- 
keeper, the  miner,  the  manufacturer,  the  miller,  the 
trader,  the  farmer  feels  and  knows  that  profits  on  the 
industries  and  business  have  constantly  diminished  for 
some  years,  and  that  the  diminution  progresses  with 
unwearied,  unfaltering  stejD.  They  know  that  the 
grounds  upon  Avhich  they  stand  are  treacherous.  They 
feel  the  foundations  slipping  from  beneath  their  feet ; 
experience  the  utmost  tension  of  all  their  powers  to 
keep  them  from  sinking  amid  the  quick-sands  of  un- 
certain, poorly  remunerative  business.  Thousands 
every  year  succumb.  The  basis  of  their  enterprises, 
the  values  of  property,  and  the  profits  of  business  con- 
tinue to  shrink  and  shrivel  until  the  feeble,  totterin<r 
base  gives  way,  and  years  of  toil  and  sweat,  and  hard 
earnings  fall  in  a  ruined  mass  together. 

Crime  stalks  abroad  like  a  devouring  monster  ;  pau- 
perism skulks  in  the  highways  and  byways  of  the  coun- 
try, and  shivers  through  the  streets  of  the  cities  beg- 
ging bread  from  door  to  door ;  prices  of  labor  and 
profits  of  business  and  industry  are  poorly  renmnera- 
tive  and  grow  less  day  by  day ;  factories,  workshops, 
and  mines  are  closing  up,  and  railway  corporations 
failing  with  millions  of  liabilities  ;  death  rates  are  in- 
creasing ;  want  of  confidence,  apprehension,  and  general 
discontent  irritate  the  peoi:)le  ;  fresh  and  terrible  upon 
the  memory  is  the  picture  of  200,000  strikers  and  rioters 


338       MONETARY  HISTORY  OF  THE  UNITED  STATES  .' 

with  the  cry  of  bread  upon  their  lips,  and  swift  revenge 
in  their  hearts,  feeling  the  pillars  of  government  and 
threatening  the  "gilded  apex  of  society."  The  wealth 
of  the  country  is  slipping  away  like  the  sands  from  the 
hour  glass  ;  morals,  the  base  of  all  human  society,  are 
diseased.  3,000,000  of  sturdy  men  are  in  idleness  and 
unable  to  procure  honest  labor  for  willing  hands  !  Up- 
on the  top  of  this  inverted  pyramid  of  weakness  and 
rottenness  is  piled  a  crushing  weight  of.  $25,000,000,- 
000  of  debt,  and  beneath  it  comes  the  keen,  cutting 
tide  of  resumption  to  dig  away  the  slender  base  upon 
which  it  rests  !     This  is  America  ! 

How  Ions;  must  this  condition  of  things  last?     When 
will  the  end  be  ?     When  will  the  country  be  crushed 
beneath  its  mountain  of  distresses?     Is  there  no  help? 
"Is  there  no  balm  in  Gilead  ?' '     Can  the  ofovernment  find 
out  no  remedy?  or,  finding  one,  will  they  refuse  to  ap- 
ply it  ?     Need  they  be  told  where  the  evil  lies  ?     Are 
they  of  those  who  are  forever  learning  and  never  able 
to  come  to  a  knowledije  of  the  truth  ?     This  distressing 
state  of  the  countrv  is  sacrificinsr  the  debtor  classes  to 
close-fisted  money  lenders  ;  the  mercantile   classes  to 
falling  markets  and  liankruptcy  ;  all  the  material  inter- 
ests of  the  nation  to  decay  ;  concentrating  the  wealth  of 
the  country  in  the  hands  of  the  few  ;  dooming  the  lab- 
orer to  want  and  misery  ;  arousing  all  the  evil  passions 
of  men  and  sowins;  broad-cast  the  seeds  of  revolution. 
These  are  not  accidental .     There  is  a  cause  for  all  these 
things.     Some  say  it  was  inflation  of  the  currency.     If 
so,  why  did  not  the  crisis  come  during,  or  soon  after, 
inflation,  in  the  fall  of  1865   and  beginning  of   1806? 
The  crisis  did  not  come  until  seven  years  after  that, 
hence,  it  could  not  have  been  caused  by  inflation.    We 


THE  PRESENT  CRISIS.  339 

say  coutraction  of  the  currency  is  the  prime  cause  of 
the  present  distress.  But  l)ulIionists  sa}'',  "If  contrac- 
tion caused  the  crisis,  wh}^  di<l  it  not  come  while  the 
jirreat  contraction  "svas  ffoins:  on,  or  soon  after?"  "We 
answer,  that  the  crisis  was  kept  off  until  1873  by  the 
extension  of  credits,  as  we  have  shown  in  the  former 
pages.  The  bullionists  again  say,  "Inflation  Avas  not 
the  immediate  but  the  remote  cause.  It  induced  spec- 
ulation and  the  creation  of  large  indebtedness,  and  these 
produced  the  crisis."  "We  reply  that  all  the  evidences 
and  facts  are  directly  against  that  assumption.  As  we 
have  shown  in  preceding  pages,  the  vast  indebtedness 
of  this  countrv  was  not  created  durinjx  iuHation  or  caused 

r 

by  it,  but,  on  the  contrary  followed  and  was  caused  by 
the  vast  contraction  of  the  currency.  These  proposi- 
tions of  the  bullionists  are  contrary  both  to  facts  and 
philosophy.  There  is  no  relation  whatever  between  an 
inflation  of  the  currency  and  stringency  of  money,  be- 
cause  the  supply  of  money,  in  such  case,  is  adequate 
to  meet  the  demand. 

Sound  money  is  not  like  the  human  sj^stem,  subject 
to  over-exertion  and  excitement,  followed  by  exhaust- 
ion or  collapse.  A  dollar,  if  it  be  a  sound  one,  whether 
paper  or  coin,  is  good,  strong,  vigorous,  possessing  the 
same  powers,  functions,  and  vitality  as  a  dollar  all 
throuirh  its  life,  until  the  hour  of  its  loss  or  destruction. 
If  its  purchasing  power  be  less  at  one  time  than  at 
another,  it  is  not  because  of  any  internal  weakness  or 
exhaustion  of  the  dollar  or  its  powers,  but  because  of 
the  increased  exchange  value  of  the  thing  sought  to  be 
purchased. 

If  the  currency  were  gradually  inflated  to  $1,500,- 
000,000  there  would  be  no  strinsencv  of  money  so  long 


340       MONETARY  HISTORY  OF  THE  UNITED  STATES  : 

as  it  remaiued  thus  inflated.  On  the  contrary,  money 
matters  would  be  easy.  But  suppose  the  country  had 
$1,500,000,000  and  the  volume  should  be  reduced  half  : 
falling  prices  would  follow  and  business  men  would  be 
forced  to  borrow  to  meet  losses  and  keep  up  their  estab- 
lishments. Then  would  be  experienced  a  stringency  in 
money  matters.  Why?  Not  because  of  inflation,  but 
the  very  opposite.  It  would  be  the  necessary  result  of 
contraction.  But  there  is  a  relation  between  a  contrac- 
tion of  the  currency,  or  a  contracted  volume  of  money, 
and  stringent  or  hard  times.  Money,  in  one  sense,  is 
like  other  things  of  value.  When  plentiful,  it  is  easy 
to  get;  when  scarce,  hard.  Every  man,  the  merest 
novice,  knows  this  to  be  true.  The  business  of  a  na- 
tion as  well  as  of  individuals  adjusts  itself  to  the  quan- 
tity of  money  at  command,  and  a  decline  in  the  volume 
of  money  forces  a  decline  in  business,  reducing  the 
means  of  meeting  obligations  and  forcing  resort  to  bor- 
rowins  to  meet  losses,  and  thus,  while  it  reduces  the 
supply  of  money,  multiplies  the  pressing  needs  of  it ; 
hence,  a  stringency  in  money  matters  inevitably  fol- 
lows and  is  produced  by  contraction. 


CHAPTER  XX. 


THE    REMEDY : 
A   PERFECT    MONETARY    SYSTEM. 

[Review  of  authors  of  the  past,  and  criticisms  on  the  current  theo- 
ries of  the  day,  iu  Prefatory  Chapters  I  and  II,  ought  to  be  read  before 
reading  this  Chapter.] 

The  first  thins;  to  be  done  is  for  every  mim  to  find 
"where  his  interest  lies  with  reference  to  national  finan- 
ciering. It  may  seem  strange  that  any  one  should  not 
know  where  his  own  interests  are,  but  it  is  true  that 
very  many  do  not  know  what  finance  policy  would  be 
best  for  them  ;  aye,  thousands  are  to-day  advocating, 
sustainins;,  votino;  for  financial  measures  which  are  iu- 
imical  to  their  prosperity. 

It  is  to  the  interest  of  the  farmer  to  sell  his  products 
and  stock  at  good  prices  ;  the  laborer  to  find  constant 
employment  at  remunerative  wages  ;  the  mechanic  that 
houses  should  be  built ;  the  artisan  and  artist  that  their 
services  should  be  in  good  demand  ;  the  professional 
classes  that  their  skill  and  ability  should  be  constantly 
sought  after  ;  the  merchant  to  find  large  sales  and  quick 
returns  of  profit ;  the  miner  that  his  products  should 
find  a  ready  market ;  the  miller  that  wheat,  flour,  and 
lumber  should  never  waste  in  his  bins  or  rot  in  the  mill 


342  THE   REMEDY  : 

yard  ;  the  commission  merchant  to  have  large  consign- 
ments and  brisk  sales  ;  the  railroad  and  other  lines  of 
transportation  to  have  immense  and  constant  shipments  ; 
the  manufacturer  that  the  demand  should  be  equal  to 
or  greater  than  the  supply  of  his  line  of  products  ;  the 
real  estate  owners  that  houses  and  lots  and  land  should 
advance  in  value  and  that  rents  should  rise  ;  the  deposit, 
exchanije  and  savinsfs  banks,  and  loan  and  fund  com- 
panics  that  all  business  should  be  brisk  and  transactions 
immense  ;  and  the  owners  of  corporate  stocks  and  bonds 
that  the  business  of  the*'corporation  should  be  large  and 
its  profits  good,  so  that  interest  on  the  bonds  may  be 
paid  and  dividends  declared  on  the  stocks. 

The  interests  of  every  one  of  the  classes  named — 
and  they  embrace  all  the  productive,  commercial,  trans- 
portation, professional,  industrial,  and  laboring  classes 
— are  that  times  should  be  "flush,"  business  brisk. 
Whatever  may  be  the  circumstantial,  local,  sectional  and 
temporary  differences  between  these  several  classes  of 
men,  their  general  interests,  their  common  prosperity 
point  to  and  rest  in  a  plentiful  supply  of  money,  because 
commercial  and  business  prosperity  cannot  exist  in  a 
commercial  nation  with  a  meagre  supply  of  money. 
Upon  the  subject  of  money  the  general  interests  of  all 
these  classes  are  identical,  and  it  is  all  important  that 
they  should  awake  to  a  consciousness  of  their  identity 
of  interests  and  engage  in  the  great  conflict  now  being 
fought  between  the  general  interests  of  this  country 
and  the  money  power.  While  the  best  interests  of  the 
latter  do  not,  in  point  of  fact,  lie  antagonistic  to  those 
of  the  great  body  of  the  people,  yet  their  unwise,  un- 
holy greed  for  money  and  power  have  brought  them 
to  concentrate  all  the  influence  of  their  abilities  and  vast 


A   PERFECT   MONETARY   SYSTEM.  34S 

wealth  to  bear  upon  governments  to  secure  financial 
policies  and  monetary  laws  inimical  to  every  interest  of 
human  society. 

The  money  power  is  composed  of  those  who  hold 
government  bonds  and  first-class  state,  municipal,  and 
corporate  securities.  The  national  banks  are  identified 
with  it.  The  power,  wealth,  and  influence  of  that  class 
is  almost  immeasurable.  It  has  been  strong;  enough  to 
control  the  government  of  the  United  States  ever  since 
the  war.  It  is  the  power  the  people  of  this  country 
must  overcome  before  relief  can  be  had. 

The  contest  will  not  be  one  of  pigmies,  but  of  giants, 
of  the  gods.  It  behooves  the  people  to  summon  all  their 
energies,  join  themselves  together,  present  a  united 
front  against  the  money  power,  and  never  cease  to  con- 
tend, even  for  years,  until  they  shall  have  rescued  the 
government  from  the  influence,  flatteries,  and  strong 
grip  of  that  giant  adversary.  This  must  be  done  peac- 
ably.  Riots,  insurrection,  revolution  would  not  accom- 
plish the  object  sought,  but  would  add  a  thousand  ills 
to  existing  distress.  It  must  be  done  by  the  creation 
of  a  full  irresistible  tide  of  public  sentiment  expressed 
on  the  rostrum,  at  the  hustings,  in  journals,  pamphlets, 
and  books,  and  then  its  power  applied  through  the  bal- 
lot so  forcibly  that  the  friends  and  auxiliaries  of  the 
money  power  shall  be  driven  from  the  commanding  of- 
ficial positions  they  now  hold  in  the  national  councils, 
and  their  places  filled  by  the  friends  of  the  people, 
by  patriots. 

Thus,  and  only  thus,  can  a  remedy  adequate  to  the 
evil  be  applied.  No  palliatives  Avill  suffice.  No  patches 
should  be  tacked  to  the  threadbare  fabric  of  policies 
that  now  cover  the  nation  with  distress.  Let  the  cloak  of 


344  THE  remedy: 

hypocritical  financial  pretensions  and  policies  be  rent 
asunder  and  cast  aside  for  all  time.  A  thorough  and 
radical  change  is  needed  before  the  country  can  be  res- 
cued from  the  rapacity  of  the  money  power  and  freed 
from  the  blighting  effects  of  vicious  systems. 

The  duty  of  the  Government, — The  object  and  end 
of  government  is  to  secure  to  the  people  the  highest 
possible  degree  of  general  welfare.  To  this  end  it  is 
its  duty  to  enact  such  laws  of  a  general  character 
and  so  administei  public  affairs  as  to  encourage  virtue 
and  intelligence  ;  facilitate  commerce,  foster  the  indus- 
tries, encourage  production,  and  secure  the  adminis- 
tration of  justice.  While  many  acts  of  government 
may  promote  these  ends,  nothing  operates  upon  them 
with  more  force  than  the  exercise  of  its  inherent  ri2:ht 
to  control  and  regulate  the  nation's  monetary  affairs. 
A  hiirh  decree  of  national  intellio-ence  and  commercial, 
industrial,  and  productive  prosperity  is  incompatible 
with  indigence,  scarcity  of  money  ;  they  are  contem- 
porary only  with  affluence,  plenty  of  money.  Neces- 
sity knows  no  law ;  misery  and  wretchedness  arouse 
the  blackest  passions  of  men,  causing  them  to  fall  into 
vice  and  trample  justice  under  their  feet.  In  such  a 
state,  unions,  howsoever  auspiciously  formed ;  consti- 
tutions, howsoever  wise,  and  laws,  howsoever  just  and 
wholesome  are  but  the  empty  form  without  the  sub- 
stance, the  letter  without  the  spirit — ropes  of  sand, 
powerless  to  serve  the  noble  ends  for  which  they  were 
framed. 

The  government,  for  its  own  preservation,  in  the 
faithful  discharge  of  the  object  of  its  creation,  ought, 
whenever  the  nation  or  any  considerable  number  of  its 
people  fall  into  decay  and  distress,  by  the  exercise  of 


A  TERFECT  MONETARY  SYSTEM.  345 

its  constitutional  powers,  administer  a  relief  fuiulamen- 
tal  in  its  nature  and  enduring  in  its  character.  The 
present  distress  of  the  country  is  financial.  The  rem- 
edy should  be  applied  against  the  cause  and  made  ade- 
quate to  bring  perfect  and  continuing  relief. 

Scai'city  of  money  is  the  cause  of  existing  evils,  and 
every  moral,  intellectual,  and  material  interest  of  the 
country,  for  vigorous  and  healthy  development,  depends 
upon  the  restoration  by  the  government  of  a  sufficient 
volume  of  currency  to  revive  all  business,  give  employ- 
ment to  labor,  and  drive  from  the  country  the  evil 
genius,  idleness. 

The  history  of  all  commercial  nations  settles,  beyond 
question,  two  propositions  : 

First :  That  a  volume  of  money  large  enough  to  cir- 
culate freely  in  every  part  of  the  nation^  move  all  the 
products  of  the  country,  and  keep  every  brain  and  mus- 
cle in  the  land  profitably  employed  is  indispensable  to  a 
fxdl  measure  of  prosperity . 

Second :  That  a  sufficient  and  steady  volume  oj 
money  is  absolutely  necessary  to  continuing  prosperity. 

To  secure  these  ends  the  following  system  is 
proposed  . 

First :  Remonetize  Silver,  and  make  it  a  full  legal 
tender  in  any  amount.  This  would  not  seriously  affect 
the  value  of  public  securities,  because  it  would  greatly 
enhance  the  value  of  silver.  The  remonetization  of 
silver  would  bring  the  following  benefits  to  the  coun- 
try :  1st,  The  capitalists  of  Europe  would,  perhaps, 
move  for  a  remonetization  of  it  there  for  their  own 
protection,  and  this  would  further  enhance  its  value  and 
thus  benefit  this  country,  because  it  produces  largo 
quantities  of  it.     2nd,  Our  immense  foreign  interest 


346  THE    REMEDY  : 

and  indebtedness  would  he  more  easily  paid  than 
if  it  all  had  to  he  paid  in  gold.  3rd,  If  silver 
should  remain  below  gold  in  value,  our  foreign  cred- 
itors would  desire  to  aet  rid  of  our  bonds.  This 
would  induce  larger  exportations  of  merchandise 
from  this  country  to  Europe,  and  the  settlement 
of  balances  in  our  favor  would  be  made  by  sending 
home  our  bonds. 

Thus,  a  process  of  reducing  our  foreign  indebtedness 
would  set  in,  proportionately  reducing  the  outflow  of 
coin,  and  thus  the  drain  of  coin  would  be  reduced 
and  our  stock  would  be  increased.  This,  again,  would 
give  the  banks,  if  the  present  banking  system  be  per- 
petuated, larger  coin  reseiwes,  enabling  them  to  supply 
the  countrv  with  a  larger  volume  of  currency.  It  would 
not  be  a  breach  of  public  faith  or  government  contract, 
because  every  holder  of  public  securities  took  them  with 
constructive  notice,  if  not  positive  knowledge,  that  all 
governments  have  absolute  power  to  make  and  unmake 
money  and  regulate  the  value  thereof.  Hence,  they 
took  the  risk  of  a  change  of  the  legal  tender  money. 
Besides  this,  silver  was  a  legal  tender  at  the  time  much 
the  larger  part  of  the  government  bonds  were  sold. 
The  remonetization  of  silver  would,  in  some  desfree,  in- 
crease  the  world's  legal  tender  money,  and  thus  tend, 
in  a  slight  degree,  to  elevate  prices,  which  would  be  a 
benefaction. 

Second  :  Repeal  the  Resumption  Act. — This  Act,  if 
not  repealed,  will  ultimately  destroy  every  dollar  of 
the  best  paper  money  we  ever  had.  Legal  tender  pa- 
per was  the  sustaining  power  which  saved  this  country 
from  universal  bankruptcy  in  1873.  It  was  good  and 
sound,  possessing  all  the  functions  of  money,  and  its 


A  PEKFECT  MONETARY  SYSTEM.  347 

value  and  desirableness  were  not  in  the  slightest  degree 
depreciated  hy  the  panic.  On  the  contrary,  it  was 
rather  enhanced  in  both  respects.  If  we  had  Had  no 
legal  tender  paper  money  then,  the  drain  of  coin  to 
settle  the  immense  foreign  balances,  which  accrued  in 
1872  and  1878  against  us,  would  have  depicted  the 
bank  coffers,  runs  on  them  would  have  ruined  them 
and  the  enormous  debts  of  the  country,  without  a  suffi- 
ciency of  legal  tender  money  to  meet  them,  would  have 
crushed  the  commercial  classes  and  destroyed  the  in- 
dustries. 

Legal  tenders  do  not  leave  the  country  like  gold  and 
silver,  but  remain  with  us  to  avert  the  reflex  action 
which  movements  of  coin  and  foreign  crises  tend  to 
have  upon  the  tinancial  affairs  of  this  countr3^  Let 
the  country  at  least  retain  its  $350,000,000  of  legal 
tenders  and  not  pois  itself  upon  the  ticklish  inverted 
cone  of  banks  of  issue  to  experience  a  precipitate  fall 
to  ruin  at  every  tremor  of  financial  disturbance. 

Uepeal  the  Kesumption  Act  and  the  country  will  be 
relieved  at  once  from  doubt  and  apprehensions  of  the 
future  ;  confidence  will  l)e  measurably  restored  ;  the 
system  of  hoarding  will  cease  ;  purse-strings  will  be 
loosened  ;  vaults  and  safes  vnW  give  up  their  treasures  ; 
capitalists  will  invest  and  lend  funds  more  freely,  and 
considerable  improvement  will  return  to  all  branches 
of  business.  This  alone  is  very  desirable.  But  it  is 
not  enough.     The  country  nmst  have  more  money. 

All  want  paper  currency. — There  is  no  question  be- 
fore the  country  as  to  whether  we  shall  have  a  paper 
money  or  not.  All,  the  most  zealous  bullionists,  know 
that  we  cannot  rely  upon  coin.  In  fact,  all  their  theo- 
ries are  arguments  for  bank  paper.     The  question  then 


348  THE    REMEDY : 

is  reduced  to  two  inquiries  :  1st,  'V^^lat  kind  of  paper 
money  shall  we  have,  and  who  shall  issue  it?  2nd, 
How  much  shall  we  have  ?  The  second  inquiry  has 
been  answered  in  the  preceding  pages.  We  ought  to 
have  at  least  $32  or  $33 ^er  capita. 

Third :  National  Bank  Notes  sliould  he  retired. — 
The  National  Bank  Act  charters  them  for  twenty  years, 
and  as  a  legal  question  would  arise  as  to  the  govern- 
ment's power  to  directly  force  the  banks  to  call  in  iind 
retire  their  issues,  we  do  not  propose  that  method. 

It  can  be  effected  without  any  breach  of  law  or  infringe- 
ment upon  charters  by  an  act  of  Congress  providing  as 
follows :  1st,  Prohibiting  the  organization  of  any 
new  banks  or  any  new  issues  of  paper  by  established 
banks.  2nd,  Let  Section  5191  of  the  Revised  Statutes 
be  so  amended  as  to  require  national  banks  to  increase 
their  deposits  of  legal  tenders  in  the  United  States 
Treasury  to  ten  or  twenty  per  cent,  of  their  issues, 
and  require  the  Treasurer  to  retire  and  destroy  national 
bank  notes  whenever  they  come  into  the  Treasury 
equal  in  amount  to  the  bank  deposits  there  ;  cancel  an 
amount  of  the  government  bonds  on  deposit  by  the 
banks  equal  to  the  same,  and  require  them  to  again  in- 
crease their  deposit  fund  in  the  Treasury.  The  banks 
would  retire  their  notes  if  the  tax  on  their  issues  were 
raised  so  as  to  render  the  issuance  of  notes  unprofitable. 
This  process  would  rapidly  accomplish  the  retirement 
and  destruction  of  all  national  bank  notes. 

Increase  the  currency  and  discharge  the  national  in- 
debtedness with  it. — The  financial  measures  of  the  gov- 
ernment ought  to  be  reversed.  A  radical  and  thor- 
ough change  is  needed.  The  policy  of  the  government, 
ever  since  18G0,  has  ])een  to  reduce  the  volume  of  cir- 


A  PERFECT  MONETARY  SYSTEM.  349 

culating  money,  increase  the  bonded  indebtedness  and 
clog  the  finances  of  the  country  with  the  useless  and 
extravagant  national  l)anking  system.  If  this  policy 
secured  present  good  or  promised  future  prosperity  it 
could  be  borne  patiently.  But  it  does  neither.  It 
brings  present  distress  and  piles  up  interest-bearing 
obligations  to  torture  and  oppress  us  in  the  future. 
The  bonded  debts  ought  to  be  discharged  and  the  vol- 
ume of  i)aper  money  largely  increased.  AVc  need  a 
paper  that  will  buy  food  and  clothing,  and  l)e  a  legal 
tender  for  all  debts  at  all  times  and  under  all  circum- 
stances ;  a  money  that  will  be  good  and  current  amid 
panics  and  crises  as  well  as  in  prosperity  ;  a  paper 
whose  nervous  system  will  not  be  so  delicate  as  to  feel 
the  shock  of  every  European  panic  ;  a  i:)aper  which  will 
not  inflate  with  every  passing  breeze  of  prosperity,  or 
shrivel  under  the  nipping  frosts  of  adversit3^ 

An  absolute,  irredeemable  leiral  tender  currency  is- 
sued  by  the  government  is  the  highest  type  and  most 
perfect  kind  of  paper  currency  that  can  be  made,  and 
such  is  the  kind  we  favor  most,  because  it  would,  after 
the,  maxununi  per  capita  issue  had  been  reached,  se- 
cure to  the  country  a  steady  per  capita  supply  of 
money,  and  free  it  from  the  constantly  changing  sup- 
ply resulting  from  banks  of  issue  and  redeemable 
legal  tender  systems.  The  objections  urged  against  an 
absolute  legal  tender  currency^  have  already  been  an- 
swered in  other  parts  of  this  work,  and  it  is  only 
necessary  to  repeat  here,  that  it  is  not  the  redeema- 
bility  of  legal  tender  currency  which  gives  it  money 
value  and  imparts  to  it  the  functions  and  powers  of 
money.  Its  virtue  rests  in  the  people's  faith  in  its  cur- 
rency, and  this  faith  arises  from  the  power  and  authority 


350  THE    REMEDY : 

of  the  government  to  declare  it  a  legal  tender  in  all 
business  transactions  and  to  enforce  its  acceptance  in 
the  discharge  of  money  obligations,  as  well  as  its  ac- 
ceptance in  payment  of  government  revenue. 

Fourth  :  Then,  in  order  to  secure  the  best  possible  pam- 
per money  and  a  continuing  sufficiency  of  it,  let  an  act 
of  Congress  provide  that  for  every  dollar  of  national 
bank  notes  retired  there  shall  be  issued  bv  the  United 
States  Treasury  a  dollar  in  absolute  legal  tender  notes 
(or,  if  3^ou  prefer  it,  redeemable  legal  tenders  raised 
to  $1,500,000,000  and  then  constantly  increased  in 
proportion  to  the  increase  of  population  and  never  to 
be  reduced  in  volume)  receivable  for  all  debts  and  ob- 
ligations, public  and  private,  except  such  sum  of  coin 
custom  duties  as  may  be  required  to  provide  a  constant 
coin  treasure  for  war  purposes  ;  until  all  such  bank  is- 
sues shall  have  been  retired  from  circulation.  This 
would  cause  the  issuance  of  about  $320,000,000  of  legal 
tenders.  Let  the  act  of  Congress  further  provide  for 
the  issuance  of  $1,000,000,000  more  of  the  same  kind 
of  legal  tender  paper,  in  various  denominations,  from 
twenty-five  cent  pieces  up  to  thousand  dollar  notes,  in 
installments  somethins:  like  the  f  ollowinir  : 

Beginning  with  January,  1879,  $350,000,000  during 
that  year  in  equal  monthly  issues  ;  during  1880,  $275,- 
000,000  in  like  manner;  during  188^,  $200,000,- 
000  in  like  manner;  during  1882,  $125,000,000 
in  like  manner,  and  during  1883,  $50,000,000 
in  like  manner.  Let  the  act  further  provide  that  the 
United  States  Treasurer  use  all  the  new  issues  which 
may  be  made  in  paying  off  all  government  bonds  that 
may  be  lawfully  paid  that  way,  and  the  residue  in  buy- 
ing up  and  retiring  outstanding  government  coin  bonds  ; 


A   PERFECT   MONETARY   SYSTEM.  351 

and  in  case  lie  can  not  use  all  of  them  in  that  way,  then 
that  he  shall  use  the  residue  of  the  issue  each  year  in 
buying  up  and  holding  for  the  government  good  State 
bonds.  Deducting  the  over-estimate  of  the  amount  of 
currency  now  outstanding  by  reason  of  that  destroyed 
since  it  was  issued,  and  the  amount  of  loss  and  des- 
truction which  would  take  place  during  the  five  years, 
this  system  would  result  in  placing  in  circulation  about 
$1,500,000,000,  of  legal  tender  currency  at  the  end  of 
that  time  ;  or  $81.25  per  capita,  estimating  the  popula- 
tion then  at  48,000,000.  This  process  would  enhance 
the  paper  value  of  government  ])onds  to  some  extent, 
but  we  think  it  safe  to  say  that  they  would  not  average 
more  than  25  per  cent,  premium  over  the  paper  during 
that  time,  for  the  following  reasons  :  1st,  The  business 
and  production  of  the  country  would  so  rapidly  increase 
that  the  new  issues  of  money  would  not  be  so  excessive 
as  to  inflate  prices  to  what  they  were  in  1866.  In  the 
beginning  of  the  latter  year,  with  an  amount  of  prop- 
erty and  business  far  less  than  will  exist  under  this 
system,  the  country,  with  a  population  of  only  35,000,- 
000  had  a  volume  of  over  $1,800,000,000  of  money.  If 
in  1866,  the  country,  in  an  unsettled  and  excited  state, 
with  a  volume  of  money  $300,000,000  greater,  a  pop- 
ulation many  millions  less,  and  the  amount  of  business 
and  property  much  less  than  during  the  enforcement  of 
this  system,  gold  bore  only  forty  per  cent,  premium 
over  paper  money  then,  it  appears  reasonable  that 
with  peace,  prosperity,  largely  increased  population, 
business  and  production,  bonds  would  not  be  higher 
than  25  per  cent,  premium  over  legal  tenders  under  the 
proposed  system.  Another  reason,  and  a  strong  one, 
for  this  belief  is  that  the  rate  of  bond  interest,  being 


352  THE  remedy: 

much  lower  than  interest  on  loans  will  be,  and  that  in- 
vestments of  capital  in  business  and  productive  enter- 
prises will  be  profitable  under  this  system,  bond-holders 
will  desire  to  exchange  their  bonds  for  money  to  invest 
in  business,  in  safe  corporate  bonds  bearing  higher  in- 
terest, or  to  loan  on  good  security.  This  would  keep 
down  the  premium  on  government  bonds  bearing  low 
interest. 

Congress  should  also  provide  that  the  surplus  reve- 
nues arising  under  this  system — which  would  be  near 
a  hundred  and  fifty  millions  per  annum  from  1879  on- 
ward without  any  increase  of  the  rate  of  taxation — 
should  be  used  also  in  buying  up  and  retiring  govern- 
ment bonds.  By  this  process  about  $1,700,000,000, 
nearly  the  total  government  interest-bearing  bonded 
debt,  would  be  paid  off  in  five  years  ;  $212,500,000  in- 
terest saved  during  the  same  time  and  $85,000,000  a 
year  gold  interest  would  be  saved  to  the  people  for  all 
time.  This  vast  saving  would  be  made  even  by  buying 
the  bonds  that  way,  and  if  any  of  them  should  be  re- 
deemed m  leo-al  tenders  at  par,  then  the  saving  would 
be  25  per  cent,  greater  on  those  so  redeemed. 

Possibly  the  whole  of  the  $1,320,000,000  legal  ten- 
ders so  issued,  and  the  surplus  revenue  could  not  be 
used  in  buying  up  government  bonds  during  the  five 
years.  In  that  case  the  Secretary  ought  to  be  em- 
powered to  use  any  amount,  not  so  paid  out,  in  buying 
up  good  State  bonds,  bearing,  as  State  bonds  do,  a 
higher  rate  of  interest  than  government  bonds,  thus 
yielding  the  government  profit  on  interest ;  and  further 
empowering  him  to  exchange  these  bonds  for  govern- 
mens  bonds,  destroying  the  latter. 

Congress  should  further  provide  that  after  the  expi- 


A  PEEFECT  MONETARY  SYSTEM.  353 

ration  of  the  five  years  required  for  eompleting  the  is- 
suance of  the  $1,320,000,000,  new  legal  tenders  like 
the  others  shall  be  issued  every  year  sutfioient  to  cover 
the  quantity  lost  and  destroyed  by  use  and  to  increase 
the  volume  of  currency  constantly  in  proportion  to  the 
ratio  of  increase  of  population,  and  that  these  issues  be 
used  also  in  buvins:  up  and  retirins:  jrovernment  bonds 
until  all  of  them  shall  have  been  paid  off  :  and  that  af- 
ter all  the  iiovernment  bonds  shall  have  been  dis- 
char«red,  then  the  annual  issues  of  new  lea^al  tenders  be 
applied  to  defraying  the  expenses  of  government  and 
thus  reduce  the  taxes,  or  used  in  improving  the  i\a.Y\- 
gatiou  of  rivers,  subsidizing  ship  lines.  improA^ing  postal 
facilities,  enlarging  the  national  libraries,  hospitals, 
military  academies,  improving  and  embellishing  the 
Capitol,  encouragement  of  the  industries,  or  put  to 
such  other  use  as  the  Ts-isdom  of  the  people  may  dic- 
tate. This  system  would  totally  extiniruish  the  ^ov- 
ernment  bonded  debt  in  six  or  seven  years  without  the 
slightest  taint  of  repudiation  or  increase  of  taxation. 
Fifth  :  In  ti))}€S  of  peace  prepare  for  war. — "We  may 
not  hope  to  escape  the  scourge  of  war.  These  terrible 
con\'ulsions  of  human  society  are  inevitable.  Twenty- 
five  years  of  unbroken  peace  is  not  common.  "Wars 
pile  up  millions  of  debt  on  the  people.  Under  the  ex- 
isting financial  policy  of  the  government  it  is  probable 
that  before  its  present  bonded  debt  is  half  jDaid  off  it 
will  have  to  issue  more  bonds  for  war  purposes.  If 
such  a  system  be  perpetuated  as  now  is  administered, 
it  is  only  a  question  of  time,  perhaps  not  a  long  time 
either,  when  all  our  energies  will  be  spent  in  paying 
interest  with  scarcely  a  hope  of  reducing  the  principal 
of  the  debt.     The  national  government  debts  in  the 


354  TKd   REMEDY* 

form  of  bonds,  of  the  civilized  world,  are  estimated  at 
about  $28,500,000,000 — an  increase  of  nearly  twenty 
thousand  millions  in  the  last  twenty-eight  years.  No 
corporate,  municipal,  or  individual  debts  are  embraced 
in  this  estimate.  This  enormous  sum,  most  of  it  pro- 
duced by  war,  will  prove  to  be  the  ruin  of  nations,  un- 
less they  have  wise  financiers.  Shall  such  be  the  fate 
of  the  United  States?  It  is  possible.  Another  brush 
or  two  with  Mexico,  disagreement  with  England  about 
boundaries,  or  fisheries  or  Fenians,  or  breaches  of 
treaties,  or  some  unlooked-for  event,  might  at  any  time 
precipitate  a  war  and  necessitate  the  sale  of  large 
amounts  of  coin  interest-bearing  bonds.  Unless  a 
rapid  discharge  of  existing  obligations  takes  place  the 
national  debt  may  soon  begin  a  steady  growth  which 
will  ultimately  destroy  the  liberties  of  the  country. 

A  few  pages  back  we  have  offered  a  plan  for  the 
total  extinetion  of  the  present  government  bonded  in- 
debtedness.- We  now  su2:2:est  one  to  forever  hereafter 
prevent  the  necessity  of  creating  any  more  bonds.  It  is 
as  follows  :  Let  Congress  pass  an  act  providing  that 
after  the  forejjoing  svstem  shall  have  l^een  inauo-urated 
there  shall  be  provided,  every  year,  a  surplus  revenue 
of  $50,000,000,  to  be  raised  from  coin  custom  dues, 
and  that  this  sum  be  put  away  in  government  vaults 
and  sacredly  kept  for  use  only  in  war.  By  this  method 
$500,000,000  of  coin  would  be  accumulated  in  the 
treasury  every  ten  years  ;  in  twenty  years,  one  thous- 
and millions. 

This  may  be  objected  to  on  the  ground  that  the  loss 
of  interest  on  this  money  would  not  justify  the  hoard- 
ing of  it.  We  answer  that  the  exj)crience  of  this  gov- 
ernment during  the   rebellion   refutes  the  objection, 


A  PERFECT  MONETARY  SYSTEM.  355 

because  the  government  lost  almost  as  much  in  the 
sale  of  her  bonds  as  twenty  year's  interest  at  five  per 
centum  per  annum  on  a  thousand  millions  would  amount 
to.  Besides  this,  every  dollar  of  interest  that  might 
be  lost  on  the  hoarding  would  be  fully  offset  by  the  in- 
terest the  people  would  have  to  j^ay  on  government 
bonds  that  must  be  issued  to  sustain  war, 'if  this  stock 
of  coin  be  not  accumulated.  Furthermore,  the  govern- 
ment, in  case  of  w^ar,  would  not  be  put  to  the  painful 
anxiety,  expense,  and  delay  of  waiting  on  fiscal  agents, 
in  the  face  of  hostile  foes,  but  would  have  the  means 
of  defense,  the  "sinews  of  war"  at  hand,  ready  to  arm 
and  equip  her  fleets  and  soldiery  at  coin  prices.  This 
policy  would  not  oppress  the  people  at  all.  The  im- 
port duties  need  not  be  increased.  That  amount  could 
be  so  raised  even  with  a  reduction  of  the  rate  of  cus- 
tom duties.  Furthermore,  Avith  $1,500,000,000  of 
money  the  present  government  taxes  would  scarcely 
be  felt  by  the  people. 

It  might  seem  best  to  some  that  this  treasure  should 
be  loaned  by  the  government  on  first-class  State  and 
foreign  government  bonds,  and  thus  not  only  have  the 
capital  but  a  constantly  accumulating  interest.  This 
idea  is  subject  to  several  objections  :  1st,  The  point 
to  be  gained  is  to  have  at  hand  a  stock  of  coin  always 
ready  for  war  purposes  ;  if  the  money  were  loaned,  a 
conflict  might  come  and  find  the  government  treasury 
empty  ;  the  bonds  would  have  to  be  sold  in  the  money 
markets  for  whatever  they  would  bring  ;  the  loss  on 
sales  would  exceed  the  interest ;  but  the  greatest  evil 
would  be  a  failure  to  obtain  the  needed  amount  of  coin  ; 
the  government  without  funds  -would  be  compelled  to 
experience  the  delay  and  expense  of  waiting  on  fiscal 


356 


THE    REMEDY : 


agents  in  a  critical  moment.  2nd,  Such  a  system  of 
loaning  might  involve  the  United  States  in  entano-lino- 
alliances  with  her  debtor  and  draw  her  into  war  with 
another  power.  Some  may  suppose  that  such  a  treas- 
ure would  induce  large  embezzlements  by  government 
officials.  This  could  be  avoided  by  Congress  appoint- 
ing a  committee  of  its  own  members  to  weigh  the  treas- 
ure every  session  and  report.  This  would  every  year 
detect  any  abstractions.  With  a  law  passed  to  hang 
every  embezzler,  and  constant  yearly  examination  and 
weighing  of  the  treasure  no  official  would  lay  the  hand 
of  theft  upon  it.  The  present  system  of  bond  selling, 
and  constant  tinkering  mth  the  currency  and  handlino- 
of  revenues  present  greater  facilities  for  embezzle- 
ment than  such  a  treasure  so  guarded  would.  It  may 
be  said  that  such  a  store  of  treasure  might  put  it 
within  the  power  of  some  ambitious  President  or 
Secretary  of  the  Treasury  to  usurp  the  political  pow- 
ers of  the  nation.  We  answer  that  the  condition  of 
the  country  contemporaneous  with  such  a  store  of 
treasure  would  be  the  surest  of  all  safe-guards  against 
usurpation.  Universal  prosperity  and  intelligence 
among  the  people  would  be  such  as  to  shame  away 
any  such  base  effort.  Outbursts  of  the  bad  passions 
of  men  and  usurpations  are  common  in  times  of  gen- 
eral distress,  but  extremely  rare  during  periods  of  nat- 
ional prosperity.  Furthermore,  ten  thousand  millions 
of  treasure  would  not  suffice  to  make  usurpation  a  suc- 
cess, unless  the  temper  of  the  people  offered  the  oppor- 
tunity, and  when  the  times  are  ripe  for  revolution  or 
usurpation,  either  may  be  successful  without  a  dollar 
in  the  treasury  as  well  as  with  plenty. 

It  may  be  said  that  if  the  plan  proved  successful  the 


A  PERFECT  MONETARY  SYSTEM.  357 

abstraction  of  so  large  a  sum  of  coin  as  $500,000,000 
or  $1,000,000,000  from  the  commercial  world  might 
prove  disastrous  to  the  general  interests  of  Europe  and 
America.  We  answer  that,  if  the  United  States  con- 
tinue the  present  financial  system  it  will  require  at  least 
the  smaller  sum  of  coin  named  to  serve  her  internal 
uses,  which  would  be  taken  from  or  kept  out  of  Eur- 
ope, and  if  we  substitute  a  paper  money  and  lock  the 
coin  up  in  the  vaults  of  the  treasury  it  would  be  the 
same  to  Europe  as  if  we  used  it,  and  the  United  States 
could  not  suffer  by  it ;  and  if  we  should  accumulate 
and  hoard  $1,000,000,000  and  so  take  it  from  the  bus- 
iness world  it  would  simply  force  the  other  civilized 
nations  to  issue  more  paper  money  to  take  its  place, 
as  this  country  did  after  the  war — a  thing  they  ought 
to  do  any  way.  It  could  injure  them  only  if  they  ob- 
stinately refused  to  issue  the  necessary  quantity  of  pa- 
per to  take  the  place  of  the  coin,  and  such  refusal  would 
be  voluntary  on  their  part  for  which  we  could  not  be 
censured.  In  case  of  war  and  the  expenditure  of  the 
coin  by  the  government  it  would  not  be  likely  to  circu- 
late here,  because  it  would  probably  be  at  a  premium 
over  our  paper,  but  would  be  hoarded  or  shipped  to 
Europe,  in  either  of  which  cases  it  could  not  detrimen- 
tally affect  our  markets,  but  would  tend  to  advance 
prices  generally  on  both  continents,  which  would  be  a 
benefaction  to  mankind. 

Sixth  :  Postal  Deposits. — Let  Congress  also,  for  the 
convenience  of  the  people  and  the  safe  keeping  of  small 
sums  of  money  for  the  poor,  provide  that  every  post 
office  shall  be  a  public  repository  of  money ;  that  when 
a  deposit  is  made  the  post  master  shall  issue  to  the  de- 
positor a  certificate  of  the  amount,  assignable  by  en- 


358  THE   REilEDY: 

clorsement,  protected  against  fraud  and  forgery  by 
marks  and  stamps,  payable  at  any  post  office  in  the 
U.  S.  or  at  the  Treasury — depositors  to  pay  a  small 
sum,  say  three  cents,  for  every  such  certificate,  but  to 
receive  no  interest  on  deposits.  This  would  give  the 
poor  the  advantages  of  the  savings  bank  without  im- 
posing on  the  government  the  expense  of  paying  in- 
terest on  deposits.  It  would  be  all  that  small  depos- 
itors need.  The  important  point  with  them  is  a  more 
safe  repository  for  their  savings,  until  they  have  ac- 
cumulated enough  to  lend  or  invest,  than  three  or 
four  per  cent,  interest  on  little  sums  of  money.  This 
non-interest-bearing  deposit  system  would  be  free 
from  serious  objections  to  the  interest-bearing  gov- 
ernment deposit  system.  The  latter  would  induce  for 
interest  profits  large  deposits  of  money,  which  would 
be  sunk,  for  the  time  being,  in  the  post  ofifices  and 
Treasury,  reduce  the  volume  of  currency  actually  cir- 
culating and  thus  be  likely  to  seriously  affect  markets 
and  business. 

Seventh  :  Subsidiary  Coins. — For  convenience,  a  few 
million  dollars  in  silver  coins,  in  pieces  from  ten  cents 
to  a  dollar,  should  be  kept  in  circulation ;  also  nickel 
in  five  cent  pieces  should  be  coined.  For  smaller  trans- 
actions and  for  convenience  in  remitting  through  the 
mails,  one,  two,  and  three  cent  postage  stamps  might 
be  made  a  legal  tender  in  very  small  amounts — less 
than  a  dollar. 

Eighth  :  Constitutional  Amendment. — Simultaneous- 
ly  with  the  efforts  to  procure  the  passage  of  the  above 
named  acts  by  Congi-ess,  let  a  united  and  continued 
pressure  be  made  for  an  amendment  to  the  Constitution 
of  the  United   States,  eml)odying  the  same  principles 


A    PERFECT    MONETARY    SYSTEM.  359 

and  empowering  Congress  to  increase  the  currency  and 
pay  off  tlie  bonds  as  stated,  but  prohibiting  them  from 
ever  reducing  the  volume  of  currency. 

Without  such  constitutional  amendment  the  benefits 
of  the  proposed  system  would  be  of  comparative  short 
duration,  because  there  are  always  those  in  the  govern- 
ment councils  who  manifest  an  itching  desire  to  tamper 
with  the  currency,  and  it  would  not  be  long  until  ef- 
forts would  be  again  made  to  change  the  system  by 
such  uneasy  and  restless  patriots.  Then,  by  all  means 
and  above  all  things,  a  constitutional  amendment  should 
be  adopted  to  secure  a  good  system  and  so  put  it  be- 
yond the  reach  of  any  class  of  men  to  arouse  appre- 
hensions in  the  minds  of  the  people  by  spasmodic  or 
constant  agitation  of  the  currency  question.  Such 
measures  would  put  an  end  to  the  mutations  of  the 
currency  and  stop  the  ceaseless  wrangle  on  the  money 
question,  because  when  once  tried  it  would  be  found 
so  universally  beneficial  and  satisfactory  that  to  erase 
it  from  the  constitution  would  be  next  to  impossible. 


CHAPTER  XXI. 


BENEFITS  OF  THE  SYSTEM  : 
PEACE  AXD  EXDURING  PROSPERITY. 

First ;  While  this  system  would,  on  the  one  hand, 
relieve  the  country  of  periodic  inflations  and  contrac- 
tions of  the  currenc}'^,  alternate  buoyancy  in  business, 
speculation  and  feverish  markets,  followed  by  depres- 
sion, falling  prices,  bankruptcy  and  general  distress, 
occasioned  by  the  present  sj'^stem  and  all  systems  of 
redeemable  bank  issues,  it  would  not,  on  the  other 
hand,  like  the  system  proposed  by  the  "  ultra  Green- 
backers,"  quickly  flood  the  country  wdth  a  redundant 
currency,  excite  the  mercantile,  trading  and  soeculative 
classes,  suddenly  advance  prices  beyond  the  power  of 
the  money  to  sustain  them,  and  after  the  commercial 
excitement  and  the  delirium  of  sj)eculation  subsided 
and  failed  to  sustain  values,  precipitate  prices  suddenly 
down  to  a  ruinous  fall,  crushing  the  mercantile  and 
debtor  classes,  depressing  business,  stopping  the  ma- 
chinery of  the  industries,  throwing  labor  out  of  em- 
ployment, and  bringing  a  great  revulsion  and  general 
disaster  upon  the  country. 

One  of  the  i)rincipal  virtues  of  the  system  proposed 
is  that,  Avhile  it  ^vill  revive  and  stimulate  all  business 
and  advance  prices,  the  graduated  system  of  increasing 
the  volume  of  currency  will  constantly  sustain  them 


PEACE  AND  ENDURING  TKOSrEKITY.  361 

and  render  a  revulsion  impossible.  If  the  first  year's 
issue  should  advance  prices  be3^ond  the  power  of  the 
money  issued  to  sustain  them,  then  the  next  year's 
issues,  coming  on  the  heels  of  the  advance,  will  sus- 
tain it.  So  with  the  issues  and  advance  of  the  second, 
third,  fourth,  and  fifth  years;  and  after  the  entire 
$1,320,000,000  shall  have  been  issued,  then  the  new 
issues  every  year  to  cover  loss  and  destruction  of 
money  and  to  increase  the  volume  in  proportion  to  the 
increase  of  population  will  be  constantly  strong  enough 
to  sustain  the  prices  previously  reached. 

There  would  be  no  undue  inflation  of  prices  to  col- 
lapse, caused  by  the  feverish  state  of  trade,  because 
the  steady  increase  of  money  would  be  an  ample  force 
to  sustain  values,  even  if  a  season  of  excitement 
should  prevail,  followed  by  a  subsidence.  The  ad- 
vance of  prices  that  this  system  would  produce  would 
not  be  unhealthy  ;  they  could  not  reach  the  bight  of 
values  in  1866,  because  then  the  country  had  one- 
fourth  less  population,  less  property,  and  one-sixth 
more  money  than  will  exist  under  this  system. 

Like  a  successful  passage  between  Scylla  and  Cha- 
rybdis,  it  would  bring  the  countr}''  safely  through  the 
straits  out  into  the  open  seas  and  quiet  harbors  of 
peace  and  enduring  prosperity. 

Second  :  It  would  largely  increase  the  government's 
revenue  without  any  increase  of  the  rate  of  taxation. 
This  is  evidenced  by  the  financial  history  of  all  gov- 
ernments When  the  volume  of  money  is  greatest 
the  revenue  is  greatest,  to  prove  which  the  reader  has 
but  to  examine  tables  in  preceding  pages,  ^^'e  subjoin 
one  here  of  the  net  revenues  of  the  Federal  Govern- 
ment from  1830  to  1876,  from  which,  it  will  be  seen 


362 


BENEFITS  OF  THE  SYSTEM 


by  comparison  with  tables  of  mon'ev,  in  the  preceding 
pao-es,  that  the  revenue  has  uniformly  risen  and  fallen 
with  the  rise  and  fall  of  the    volume  of  money  in  the 


country : 

1830 §24,844,116 

1831 28,526,820 

1832 31,865,561 

1833 33,948,426 

1834 21,091,93.-) 

1835 35,430,087 

1836 50,826,796 

1837 24,890.864 

1838 26,302,561 

1839 30,023,9611 

1840 19,442,646 

1841 16,860,160 

1842 19,965,009 

1843 (to  June  30)  8,231,001 

1843-'44 29,320,707 

1844-'45 29,941,853 

1845-'46 29,699,967 

1846-'47 26,437,403 

1847-'4S 35,698,699 

1848-'49 30  721,077 

1849-'50 43,592,888 

1850-'51 62,555,039 

1951-'52 49,846,815 

1852-'53 61.483  730 

1853-'54 73,800,341 

1854-'55 65,350.574 

1855-'56 74  056,699 

1856-'57 68,96.-),312 

1857-'58 46,655,365 

1858-'59 52,761,699 

1859-60 56,054,599 

1860-'61 41,476.209 

186l-'62 51,907,944 

1862-'63 112,088,945 

1863-'64 262,742,354 

l864-*65 323,092,785 

1865-'66 619,646,647 

1866-'67 489,912,182 

]867-'68 405,638,083 

1868-'69 370,945,817 

1869-'70 411,255,477 

1870-'71 383,327.341 

187l-'72 374,111,365 

1872-'73 333,741.252 

1873-'74 304,979,794 

1874-'75 288.000,051 

1875-'76 265,995,982 


51 

82 

16 

25 

55 

101 

08  i 

69. 

74  1 

68 

08 

27 

25 

26 

78 

90 

74 

16 

21 

50 

88 

33 

60 

31 

40 

68 

34 

57  1 

96/ 

58 

83 

39. 

62 

50 

32 

92 

91, 

34 

32 

94 

63 

07 

73 

47 

84 

10 

39 


Large  amount  paper  money  circulat'g. 
Contraction  of  currency  and  crisis. 


Years  of  scarcity  of  money  and  de- 
pression of  business. 


Flush  times.    Plenty  of  Money. 

Crisis.     Contraction. 

Increase  of  Money. 
■  Crisis  of  1861. 

Increasing  volume  of  money. 

.  Greatest  inflation. 

Years  of  contraction. 


PEACE  AJ^D  ENDURING  PROSPEKITY.  363 

A  volume  of  $1,500,000,000  would  raise  the  revenue 
to  $400,000,000  or  $500,000,000  without  an  increase 
of  taxes.  This  would  yield  a  suq^lus  of  $150,000,000 
per  annum,  and  it  invested  every  year  in  buying  and 
retiring  government  bonds  would  soon  pay  off  the 
whole  bonded  debt. 

Third  :  It  would  enhance  public,  municipal  and  cor- 
porate securities  and  thus  benefit  the  holder  of  them 
M'ithout  inflicting  the  slightest  injury  on  the  jDcople.  It 
would  relievo  the  railroads  aud  enable  their  owners  to 
extricate  them  from  the  toils  of  bankruptcy,  to  pay  in- 
terest on  their  mortgage  bonds,  and  to  pay  their  em- 
jiloyes  better  wages.  It  would  save  the  debtor  from 
ruin,  enable  him  to  pay  his  debts  ;  and  save  creditors 
from  the  effects  of  repudiation,  stay  laws,  exemption 
laws  and  bankruptcies. 

Fourth  :  It  would  give  us  the  best  j^aper  money  in 
the  world  ;  a  legal  tender  whose  purchasing  and  debt- 
paying  powers  could  not  be  destroyed  by  money  crises 
or  by  anything  except  the  will  of  the  government  or 
the  destruction  of  the  government.  ^N'or  could  it  be 
seriously  affected  by  anything  except  loss  of  faith  in 
the  government.  So  long  as  the  government  might 
stand,  so  long  woukl  this  money  remain  good.  It 
woukl  give  every  holder  of  this  paper  a  jiecuniary  inter- 
est in  being  loyal  and  patriotic,  in  preserving  the  govern- 
ment that  he  would  not  feel  with  any  other  kind  of 
money. 

Fifth  :  It  would  unclog  the  wheels  of  progress,  in- 
spire the  brain  to  thought,  nerve  the  arm  to  labor  and 
arouse  tile  latent  energies  of  46,000,000  of  people  to 
industry.  It  would  re-open  the  abandoned  mines,  re- 
people  the  sho^is  and  factories  with  workmen  and  give 


364  BENEFITS  OF  THE  SYSTEM  : 

employment  to  the  3,000,000  of  unwilling  idlers.  It 
would  give  opportunity  to  all  to  eat  honest  bread  and 
thus  reduce  the  appalling  mass  of  pauperism,  crime 
and  wretchedness  which  now  distress  the  country.  It 
would  advance  prices,  increase  profits,  silence  the  pub- 
lic crier,  restore  the  cheerful  hum  of  machinery  and 
drive  bankruptcy  commissioners  and  assignees  to  other 
pursuits.  It  would  give  a  new  impetus  to  all  the  in- 
dustries, spread  the  sails  of  commerce,  open  up  the 
channels  of  business,  fill  the  land  with  peace  and 
plenty  and  the  hearts  of  the  people  with  gladness. 

Sixth  :  It  would  pay  off  every  government  bond  in  a 
few  years,  relieve  the  country  from  the  intrigues  of 
European  capitalists  and  lift  from  the  backs  of  the 
people  the  crushing  load  of  interest  under  which  they 
now  stajrsrer. 

SeveMh  :  It  would  free  us  from  the  money  power  of. 
the  world,  and  relieve  us  from  the  bad  reflex  influence 
of  foreign  crises  and  foreign  financial  policies.  Times  of 
depression  produced  by  extraneous  causes  M^ould  come 
for  a  season,  but  not  in  the  form  of  destructive  panics 
and  financial  crashes.  Our  national  coffers  would  arm  us 
against  the  world.  The  weakness  of  o-overnments  which 
is  born  of  poverty  would  not  be  ours.  The  government's 
known  strength  in  riches  would  protect  it  from  insult. 
Peace  would  rest  securely  upon  the  shield  and  buckler 
of  defense.  A  new  era  of  unbounded  prosperity 
Avould  set  in,  peopling  the  vast  regions  of  this  richly 
endowed  heritage  with  a  hundred  millions  of  happy 
souls,  and  swelling  the  rippling,  eddying  current  of 
progress  to  a  full  and  steady  tide  of  success. 

Drawn  from  the  general  depression  of  business,  de- 
cay of  the  industries,  the  appalling  increase  of  cas- 


PEACE   AND    ENDURING   PROSPERIXr  3G5 

ualties,  pauperism,  crime,  suicides,  murders,  riots, 
strikes,  iucendiarism  and  general  distress,  many  people 
have  reasoned,  and  not  without  some  foundation  in 
view  of  these  facts,  that  our  free  institutions,  our  form 
of  government  and  its  methods  of  administration  are 
failures.  Howsoever  loth  the  patriot  may  be  to  believe 
this  and  howsoever  much  it  may  distress  him,  yet  it 
is  true,  and  the  feeling  of  insecurity  and  the  apprehen- 
sion that  the  government  under  its  present  constitution 
is  inadequate  to  preserve  the  peace  and  mete  out  jus- 
tice spreads,  grows  and  strengthens  with  every  new 
evidence  of  national  distress.  Notwithstanding  the 
fact  that  the  billions  and  nervous  are  as  prone  to  mag- 
nify causes  of  apprehension  as  the  sanguine  are  to  over- 
look them,  yet  the  present  state  of  the  country,  with- 
out immediate  legislative  relief,  points  the  mind  of  the 
candid  investigator  to  such  an  accumulation  of  ills  by 
the  time  we  reach  another  national  election  as  will  in- 
duce a  large  part,  perhaps  a  majority,  of  the  people,  to 
seek  out  and  elect  to  the  Presidency  some  man  whom, 
from  his  iron  will,  imperviousness  to  common  sympa- 
thy, and  imperial  impulses  and  tendencies,  they  may 
believe  equal  to  grappling  Avith  the  public  dangers  and 
suppressing  by  force  the  tendency  to  disorder,  rather 
thiui  have  the  administration  guided  by  law  and  tem- 
pered with  a  paternal  care.  If  such  should  occur, 
then  a  stern  sj'stem  of  governing  by  blood  and  steel 
would  set  in  to  blot  out  the  Constitution,  cut  down 
the  Tree  of  Liberty,  and  cleave  asunder  the  bond  of 
union  between  the  States. 

The  monetary  system  proposed  by  the  author,  if  put 
in  force,  would  revive  business,  restore  prosperity, 
give  employment  to  labor,  remove  the  general  distress. 


366  BENEFITS  OF  THE  SYSTEM. 

relieve   the  minds  of  the  people,  remove    doubts  of 
the  virtue  and  strength  of  the  government,  water  the 
Tree  of  Liberty,  knit  the  bonds  of  Union  more  closely 
together,  insure  the  conduct  and  results  of  the  next 
national  campaign,  and  succeeding  ones,   on  true  and 
time-honored  American  principles,  and  secure  adminis- 
trations  composed   of   patriots  whose  hearts  beat  in 
sympathy  with  the  people,   and  whose  acts  would  be 
cQrected  toward  securing  them  the  largest  measure  of 
peace,  liberty  and  happiness.      Then  discontent,  the 
mainspring  of  revolutions,  would  give  place  to  zeal  in 
peaceful  pursuits  ;  idleness,  the  fruitful  parent  of  riots, 
strikes  and  insurrections  would  be  changed  to  diligent 
industry  ;  communism  would  no  longer  organize  to  dis- 
integrate society,  but  having  lost  a  practical  reason  to 
sustain  it,  would  perish  ;  the  imperial  rule  of  blood 
and  iron  would  find  no  place-  on  this  continent,  but  the 
goddess  of  Liberty,  with  her  soft,    maternal  touch, 
would  rule  the  land  with  gentleness.     Then  Columbia 
would  be,  indeed,  "the  land  of  the  free  and  the  home 
of  the  brave,"  the  hope  of  all  the  earth,  and  an  asylum 
for  the  oppressed  of  all  nations. 


CHAPTER  XXII. 


SUGGESTIONS     SUBSIDIARY. 

First :  The  author  does  not  hold,  nor  endeavor  to  ad- 
vance the  idea,  that  money  can  perform  the  vital  functions 
of  national  intelligence,  virtue  and  patriotism.  These 
are  the  enduring  support  of  all  good  government. 
When  they  give  Avay,  money  cannot  save  the  i^olitical 
fabric  ;  it  topples  and  fnTls  to  ruin.  A  great,  an  awful 
responsibility  rests  upon  the  teachers,  the  preachers  and 
stiitesmen  of  this  age,  for  to  them  is  committed  the 
three  vital  spirits  of  liberty,  intelligence,  ^^l•tue  and 
patriotism.  But  of  all  the  forces  in  a  nation  which  re- 
move the  barriers  from  between  the  people  and  these 
mind  leaders,  and  facilitates  the  application  and  utili- 
zation of  their  thoughts  which  warm  and  words  which 
burn  down  into  the  soul,  none  is  so  powerful  or  uni- 
versal as  money.  This  is  so  because  money  circulating 
freely  in  a  nation  gives  employment  to  all,  places  them 
in  comfortable  circumstances  and  brings  the  mind  into 
a  tranquil  state,  thus  placing  the  people  in  a  condition 
to  read,  reflect  and  receive  good  and  wholesome  in- 
struction. It  subtains  the  teacher,  minister  and  the 
statesman,  enabling  them  to  devote  their  lives  to  the 
public  good.     It  also  increases  schools  and  colleges  and 


368  SUGGESTIONS    SUBSIDIARY. 

facilitates  the  publication  and  dissemination  of  good 
literature ;  sustains  benevolent  institutions  and  dis- 
tributes the  gospel.  Thus,  the  free  circulation  of 
money  in  a  nation  not  only  brings  the  minds  of  the 
masses  into  a  healthy  state,  but  supplies  them  with 
wholesome  moral  and  intellectual  nutriment,  securing 
national  growth  in  those  virtues.  Properly  train  up 
the  youth  and  supply  the  people  with  a  sufficient  and 
steady  volume  of  money,  and  all  the  material  interests 
of  the  nation  will  be  well  provided  for. 

Second  :  The  complex,  arbitrary  features  of  the  nav- 
igation laws  ought  to  be  so  amended  as  to  give  capital 
and  enterprise  that  freedom  which  they  must  enjoy  to 
successfully  engage  in  shipping.  Lines  of  steamers  to 
India,  China,  South  America,  the  isles  of  the  seas,  and 
wherever  else  profit  awaits  the  enterprising  shipper, 
ought  to  be  judiciously  aided.  Our  languishing  ship- 
ping interests  would  thus  be  greatly  benefitted  and  our 
commerce  and  internal  wealth  increased.  And  the  in- 
creased custom  receipts  would  suffice  to  repay  the 
Treasury  every  dollar  of  subsidies  granted.  One  of 
the  greatest  benefits  would  l)e  the  employment  of  three 
or  four  hundred  thousand  Americans  in  maritime  pur- 
suits, thus  giving  employment  to  an  army  of  men  who 
mi<Tht  otherwise  remain  in  idleness,  and  fitting  them 
for  naval  warfare. 

Third  :  All  the  navigable  rivers  in  the  country  ought 
to  be  so  improved  as  to  make  internal  commercial 
transit  l)y  water  safe,  speedy  and  cheap. 

Fourth :  Such  new  great  trunk  lines  of  railroad  as 
would  })enefit  the  country  at  large  or  any  great  section 
by  their  consti-uction,  should  receive  such  assistance  as 
would  be  compatible  with  the  general  interests  of  the 


SUGGESTIONS    SUBSIDIARY.  369 

country  and  not  impoverish  the  Treasury,  put  the 
government  in  dol>t  or  impose  burdens  upon  the 
people.  The  Southern,  or  Texas  Pacitic  Railway 
ought  to  be  judiciously  aided  by  the  government,  so  as 
to  secure  its  completion  through  Texas  and  Mexico  to 
the  Pacific  coast.  Thus  would  be  established  a  trans- 
continentiil  line,  free  from  the  snows  of  the  North, 
lying  through  a  pleasant  climate.  It  would  rapidly 
people  the  South  and  develop  the  great  natural  re- 
sources of  that  section  of  the  Union.  It  would  induce 
the  opening  up  of  some  of  the  richest  mines  in 
the  world,  situate  in  iNIexico,  whose  untold  wealth 
would  flow  into  the  United  States.  It  would  open 
such  a  system  of  commercial  and  social  intercourse  be- 
tween the  United  Stales  and  Mexico  as  to  impress 
.upon  that  people  the  ideas,  manners  and  customs  of 
our  country  and  thus  be  the  means  of  the  more  se- 
curely establishing  friendly  relations  between  the  two 
nations. 

Fifth  ;  Such  treaties  should  be  made  with  the  proper 
governments  as  would  secure  a  canal  across  Central 
America  from  Amatique  Bay,  or  across  Panama,  to 
the  Pacific,  deep  and  wide  enough  for  the  greatest 
steamers  to  pass  with  ease  and  safety,  and  with  special 
privileges  to  the  United  States  and  her  people.  This 
would  give  our  own  ships  a  monopoly  of  the  trade 
with  ISIexico,  secure  home  transit  from  the  Atlantic  to 
the  Pacific  and  jrreatlv  aid  our  ocean  intercourse  with 
China. 

Sixth :  The  marked  tendency  of  the  landed  property 
of  the  country  to  concentrate  in  the  hands  of  heavy 
capitalists  and  the  rapid  increase  in  the  number  of  the 
houseless  and  homeless  are  matters  well  calculated  to 


370  SUGGESTIONS   SUBSIDIARY. 

excite  apprehensions  in  the  minds  of  the  thoughtful. 
Nothing  gives  men  greater  interest  in  the  peace  and 
prosperity  of  the  sections  of  country  where  they  reside 
than  ownership  of  real  property.  Let  a  man  be  de- 
prived of  a  property  interest  in  the  soil  and  he  stands  in 
the  attitude  of  a  wanderer  upon  the  face  of  the  earth, 
without  anything  to  give  him  a  fixed  habitation  or  an 
abiding  personal  interest  in  the  things,  conditions  or 
laws  of  his  locality ;  and  if  misfortune  be  his  lot  and 
poverty  his  portion  he  is  in  no  condition  to  enjoy  or 
appreciate  the  common  blessings  of  free  institutions. 
Such  an  one,  as  the  unfortunategenerally  do,  wouldbe 
apt  to  attribute  his  poverty,  misfortunes  and  distress 
to  the  conditions  of  society  and  the  government.  There 
are  millions  of  such  in  the  United  States  to-day ! 
What  materials  for  busybodies,  the  evil-minded  ene- 
mies of  our  institutions  to  work  upon  !  What  a  stock 
for  the  average  politician  to  handle,  arousing  their 
passions  and  increasing  their  prejudices  against  the 
laws  and  the  crovernment !  What  a  school  for  commun- 
ists,  disorganizers  and  revolutionists  !  And  the  private 
lives  of  this  unfortunate  class,  consider  them  !  With- 
out any  fixed  habitation,  no  place  of  rest,  no  abiding 
home,  buffetted  about  from  place  to  place  by  the  busy, 
bustling,  heartless  world,  Avith  scarcely  time  to  snatch 
a  crumb  of  fleeting  comfort  as  it  flies,  or  catch  a 
glimpse  of  pleasure  as  it  dances  by,  the  plowshare  of 
distress,  or  the  hard  lines  of  desperate  thought  cut 
deep  furrows  in  his  face,  or  utter  abandon  and  dogged 
indifference  sit  upon  his  countenance.  The  compan- 
ion of  his  bosom,  with  the  shades  of  melancholy  on 
her  countenance  and  a  deep,  abiding  sadness  in  her 
heart,  yearning  for  a  surcease  of  sorrow  but  despair- 


SUGGESTIONS   SUBSIDIARY.  371 

ing  of  a  better  state,  prepares  the  meagre  meal,  cares 
for  the  helpless  and  unfortunate  offspring  and  performs 
the  round  of  drudgeries  with  a  dull  and  hopeless  resig- 
nation, as  if  the  fates  had  l)ound  her  to  the  chariot 
wheels  of  distress  forevermore !  Ambition  gone, 
emulation  dead,  self-respect  strangled,  every  hope  of 
life  burnt  out,  the  heart  seized  with  despair,  anger,  re- 
venge and  desperation  alone  animating  them,  the  un- 
fortunate and  poverty-stricken  classes  constitute  the 
body  of  riots,  the  strength  of  insurrections  and  the 
terrible  passion  and  destructive  force  of  revolutions  ! 

The  poor  man's  hope  is  the  rich  man's  protection. 
No  nation  can  long  remain  in  peace  with  an  oppressed, 
poverty-stricken  citizenship.  No  people  can  long  re- 
main free  where  the  masses  are  tenants.  The  ques- 
tion of  property  qualifications  to  vote  soon  arises  in 
the  minds  of  landed  proprietors  where  their  tenants 
exercise  the  right  of  freemen  and  vote  a  tax  ;  the  ten- 
antry bitterly  denounce  the  restrictions,  and  the  irre- 
pressible conflict  of  labor  and  capital  grows  and 
strengthens.  Thus,  two  forces  combine  to  destroy  the 
peace  of  the  country  and  the  liberties  of  the  poor  :  the 
tendency  of  the  rich  to  restrict  the  political  rights 
of  the  poor,  and  the  tendency  of  the  latter,  driven  by 
distress,  oppression,  and  revenge  to  assume  the  rights 
of  unrestricted  sovereignty,  take  the  law  into  their  o\\ti 
hands,  right  their  wrongs,  and  punish  their  oppressors. 
Nothing  drives  a  nation  more  certainly  to  this  state 
than  the  concentration  of  the  landed  property  into  the 
hands  of  a  few  and  a  growing  army  of  poverty  stricken 
tenants  and  homeless  wanderers.  Proof  of  this  is 
abundant  in  the  histories  of  Rome,  France,  Ireland, 
and  Mexico. 


372  SUGGESTIONS    SUBSIDIARY. 

It  is  important  that  the  law-making  power  should 
look  to  the  comfort  of  the  masses  and  enact  such  laws 
as  will  place  relief  within  the  reach  of  the  poor.  And 
it  is  of  paramount  importance  that  a  national  pride 
should  be  aroused  in  the  American  mind  for  the  pos- 
session of  landed  property.  It  should  be  one  of  the 
first  and  most  enduring  ambitions  of  the  poor  man  to 
own  a  home,  to  possess  in  fee  the  soil  upon  which  he 
lives  ;  it  is  his  surest  safeiruai'd  airainst  want,  and  the 
strongest  barrier  that  can  be  raised  against  oppression 
and  the  destruction  of  his  liberties.  A  state  of  pros- 
perity and  contentment  among  tlie  people  is  a  stronger 
conservator  of  peace  and  order  in  society  than  the  arm 
of  the  law  or  standing  armies. 

Mr.  Garfield. — In  his  great  speech  in  Congress  in 
favor  of  resumption,  Mr.  Garfield  deplored  the  loss  by 
workingmen  of  $12,000,000  of  their  $120,000,000  de- 
posits, w^iich  he  claims  would  follow  a  repeal  of  the 
Kesumption  Act,  on  account  of  the  depreciation  of  the 
legal  tenders.  This  would  be  a  depreciation  of  10  per 
cent.,  raising  gold  to  12|  premium,  a  little  higher  than 
it  was  in  1874,  before  the  Resumption  Act  was  passed, 
when  there  was  more  paper  money  than  now.  The 
simple  repeal  of  the  Resumption  Act  would  not  necessi- 
tate the  advance  of  the  gold  premium.  We  doubt 
whether  the  repeal  of  the  Resumption  Act  would  be 
followed  by  1  per  cent,  advance  in  gold,  unless  some 
other  circumstance  produced  it,  such  as  falling  off  in 
our  forcii»;n  balances  or  the  accruing  of  balances  against 
us,  and  an  advance  in  gold  in-emium  from  these  causes 
would  occur  as  well  with  as  without  resumption,  un- 
less the  United  States  Treasur}''  possessed  coin  to 
redeem  every  note  that  might  be  presented,   and   this 


SUGGESTIONS   SUBSIDIARY.  373 

may  not  be  looked  for  The  loss  to  workmen  on  their 
deposits,  resulting  from  a  repeal  of  the  Resumption 
Aet  would  scarcely  be  perceptible.  But  what  would 
they  gain? 

The  repeal  of  the  Resumption  Act  would  unhoard  at 
least  $100,000,000  of  the  money  now  hoarded  ;  it  would 
cause  the  National  Banks  to  issue  more  notes,  saj^  $25,- 
000,000  ;  it  would  remove  the  apprehensions,  doubts, 
fears,  and  want  of  faith  now  existing  everj-^vhere  ;  give  a 
new  imjDetus  to  all  busmess  ;  enhance  values  and  raise 
wages.  It  would  not  only  do  this,  but  proportionately 
increase  all  business  and  thus  bring  a  demand  for  the 
employment  of  idle  workmen,  and  give  more  constant 
employment  to  those  engaged.  Thus  a  double  benefit 
would  result  to  workmgmen  ;  a  large  advance  in  wages, 
and  more  constant  employment.  This  would  be  the 
workman's  gain  by  repeal,  and  it  is  all  in  all  to  him. 
It  is  work  that  he  wants  at  living  wages.     Without  it, 

♦'  What  crowds,  in  even'  land, 
Are  wretched  and  forlorn  ; 
Sei  yonder  poor,  o'er  labor'd  wight, 
So  abject,  mean,  and  vile, 
Who  bt^jjs  a  brother  of  the  earth 
To  give  him  leave  to  toil ! 
And  see  his  lordly  fellow  worm 
The  poor  petition  spurn, 
Unmindful,  tho'  a  weeping  wife 
And  helpless  offspring  mourn.  " 

A  Question. — Some  ask  :  "If  the  government  should 
issue  more  money,  how  will  the  people  get  it,  the  gov- 
ernment will  not  give  it  to  them?"  It  is  stran2re  that 
such  a  question  should  be  asked,  but  it  has  been  asked 
a  million  tunes,  no  doubt.  It  is  easily  answered.  Sup- 
pose the  government  should  issue  $1,000,000,000  new 
"Greenbacks"  ard  buy  up  her  bonds  with  them.  The 
parties  to  whom  this  money  is  paid  will  invest  it  in 
houses  or  land,  or  in  commerce  or  the  industries,  and 


374  SUGGESTIONS    SUBSIDIARY. 

thus  give  it  a  start  to  circulate,  or  eise  lend  it  to  some 
one  who  will  so  invest  it.  The  man  who  sells  his  lands 
for  it  will  invest  it  somewhere,  perhaps  in  mules  or 
cattle,  or  grain-  The  man  who  goes  to  manufacturing 
with  part  of  it  will  employ  masons,  carpenters,  and 
machinists  to  erect  his  buildings  ;  then  he  will  buy  the 
raw  material  from  others,  and  hire  factory  hands  and 
pay  out  his  money  to  them.  They  must  live ;  they 
buy  food  and  clothing.  Thus  the  money  would  soon 
scatter  in  every  direction  and  circulate  in  all  parts  of 
the  country,  buying  merchandise  and  employing  labor. 


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